[Federal Register Volume 62, Number 2 (Friday, January 3, 1997)]
[Rules and Regulations]
[Pages 330-331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-33386]
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DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration (NOAA)
50 CFR Part 259
[Docket No.961122326-6326-01; I.D. 081092G]
RIN 0648-AF22
Capital Construction Fund; Interim Fishing Vessel Capital
Construction Fund Procedures
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Final rule.
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SUMMARY: NMFS issues this final rule to allow fishermen to use the
Fishing Vessel Capital Construction Fund Program (Program) for
equipping and/or modifying their fishing vessels to increase general
vessel safety and/or to comply with specific requirements established
under the Commercial Fishing Industry Vessel Safety Act of 1988 and/or
other laws or regulations that materially increase the safety of a
fishing vessel. The result is that a vessel equipment acquisition or
vessel modification, which materially increases the safety of a
qualified vessel, will be treated as a reconstruction and exempted from
certain Program rules so that payment for it becomes a qualified
withdrawal.
EFFECTIVE DATE: February 3, 1997.
FOR FURTHER INFORMATION CONTACT: Charles L. Cooper (Financial Services
Division, NMFS) at 301-713-2396.
SUPPLEMENTARY INFORMATION:
Background
The Program allows fisheries taxpayers to defer paying Federal
taxes on fishing vessel income. Income on which taxes are to be
deferred must be deposited in accordance with Capital Construction Fund
Agreements and reserved for the equity portion of fishing vessel
construction, reconstruction, or acquisition costs. All deferred taxes
are eventually recaptured by reductions in the depreciation basis, for
tax purposes, of vessels benefitting from tax deferrals under the
Program.
Under present Program rules (50 CFR part 259), fishermen cannot use
the Program to pay for safety equipment unless that equipment is part
of a vessel construction or reconstruction project. Although this is
not generally a problem when fishing vessel construction is involved,
it can be a problem when fishing vessel reconstruction is involved.
Generally, improving a fishing vessel will not qualify as
reconstruction under this Program's rules unless the cost of doing so:
(1) Is a capital expenditure; (2) amounts to at least $100,000 or 20
percent of the vessel's acquisition cost (whichever is less); and (3)
substantially prolongs the vessel's useful life, increases its value,
or adapts it to a different fisheries use. The purchase and
installation of fishing vessel safety equipment would seldom meet this
rules test. Many fishing vessel modifications for safety purposes would
also fail to meet this test.
Additionally, the conditional fishery requirements apply to fishing
vessel reconstruction under this Program. These requirements restrict
the availability of Program benefits in fisheries where the Government
deems additional or increased harvesting capacity unwarranted. These
conditional fishery requirements could also, under the present Program
rules, prevent use of this Program for safety projects.
This rulemaking permits Program use for the acquisition and
installation of fishing vessel safety equipment and for fishing vessel
modifications whose central purpose is to increase vessel safety to be
treated, in their own right, as reconstructions for the purpose of
withdrawing tax-deferred funds from Capital Construction Funds to pay
for them. Except for the capital expenditure requirement, these fishing
vessel safety projects are now exempted from the normal rules test that
determines whether fishing vessel improvements can qualify as
reconstructions. They are now also exempted from the conditional
fishery requirements that would otherwise apply to reconstruction
projects.
Notice of proposed rulemaking for this change was published in the
Federal Register on November 18, 1992 (57 FR 54356).
Comments and Responses
Seven parties responded in writing to the notice of proposed
rulemaking. All supported it. The general response was that this rule
would give the industry needed flexibility in meeting new and proposed
safety requirements for fishing vessels. One of those responding was
the Director, Northeast Region, NMFS, for NOAA, who also recommended
expanding the proposed rule to include the acquisition and installation
of equipment required by law or regulation which materially increases
the safety of a qualified fishing vessel. This recommendation was made
for the purpose of helping fishermen pay for the high cost of
transponders required for fishery management purposes; but which also
serve to materially increase vessel safety by providing accurate hourly
position transmissions that could be sent directly to the U.S. Coast
Guard.
After considering these comments, NMFS has decided to proceed with
final rulemaking with only a minimum change in the proposed rule to
allow the Program to be used for vessel equipment acquisitions or
vessel modifications, which materially increase the safety of a
qualified vessel, to be treated as a reconstruction when made either
for such central purpose or because it was required by law or
regulation.
Effect of Final Rule
This rule allows the fishing industry to use their Capital
Construction Funds to pay for fishing vessel safety-related projects
without regard to: (1) The cost of the safety project; (2) whether the
fishing vessel involved in the safety project had its useful life
extended, its
[[Page 331]]
value increased, or was converted to a different fisheries use; and (3)
conditional fishery requirements.
Classification
The General Counsel of the Department of Commerce certified to the
Chief Counsel for Advocacy of the Small Business Administration that
this rule will not have a significant economic impact on a substantial
number of small entities because it relates to financial assistance
programs in which participation is voluntary and does not impose any
cost, economic burden, or reporting burden on the industry. As a
result, a regulatory flexibility analysis was not prepared.
This action has been determined to be not significant for the
purposes of E.O. 12866.
List of Subjects in 50 CFR Part 259
Fisheries, Fishing vessels, Income taxes, Reporting and
recordkeeping requirements.
Dated: December 27, 1996.
Nancy Foster,
Deputy Assistant Administrator for Fisheries, National Marine Fisheries
Service.
For the reasons set out in the preamble, 50 CFR part 259 is amended
as follows:
PART 259--CAPITAL CONSTRUCTION FUND
1. The authority citation for part 259 continues to read as
follows:
Authority: 46 U.S.C. 1177.
2. Section 259.31 is amended by removing the authority citation in
the parenthetical at the end of the section and by adding a new
paragraph (e) to read as follows:
Sec. 259.31 Acquisition, construction, or reconstruction.
* * * * *
(e) Safety projects. The acquisition and installation of safety
equipment for a qualified vessel and vessel modifications whose central
purpose is materially increasing the safety of a qualified vessel or
the acquisition and installation of equipment required by law or
regulation that materially increases the safety of a qualified vessel
shall, regardless of cost, be treated as reconstruction for the purpose
of qualifying a CCF withdrawal for such expenditure, shall be exempt
from having to meet conditional fishery requirements for reconstruction
as set forth in Sec. 259.32, and shall be exempt from all qualifying
tests for reconstruction set forth in paragraph (b) of this section,
with the following exceptions:
(1) A safety improvement shall be required to meet both conditional
fishery requirements and all qualifying tests for reconstruction if it
serves the dual purpose of safety and meeting the reconstruction
requirement of paragraph (a) of this section for qualifying a
withdrawal for the acquisition of a used vessel;
(2) That portion of the actual cost of a safety improvement that is
to be paid for from the CCF must be classifiable and treated as a
capital expenditure for Internal Revenue Service purposes;
(3) Safety improvement projects whose clear and central purpose is
restricted to complying with the requirements of the Commercial Fishing
Industry Vessel Safety Act of 1988 (Public Law 100-424 Sec. 1, 102
stat. 1585 (1988) (codified in scattered sections of 46 U.S.C.)) shall,
without further documentation, be considered to fall within this
paragraph (e). Satisfactory documentation will be required for all
other projects proposed to be considered as falling within this
paragraph (e). Projects not required by law or regulation whose central
purpose clearly involves something other than an improvement that
materially increases the safety of a vessel will not be considered to
fall within this paragraph (e).
[FR Doc. 96-33386 Filed 12-27-96; 4:05 am]
BILLING CODE 3510-22-F
