Capital Construction Fund; Fishing Vessel Capital Construction Fund Procedures, 57496-57502 [2014-22821]

Agencies

• DEPARTMENT OF COMMERCE
• National Oceanic and Atmospheric Administration

[Federal Register Volume 79, Number 186 (Thursday, September 25, 2014)]
[Proposed Rules]
[Pages 57496-57502]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-22821]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 259

[Docket No. 080410551-4596-01]
RIN 0648-AW57


Capital Construction Fund; Fishing Vessel Capital Construction 
Fund Procedures

AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and 
Atmospheric Administration (NOAA), Commerce.

ACTION: Proposed rule; request for comments.

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SUMMARY: NMFS proposes to amend the Capital Construction Fund (CCF) 
regulations to eliminate provisions that no longer meet the needs of 
CCF participants, and to simplify and clarify the regulations to better 
implement the purposes of the underlying statute. These amendments 
would eliminate the minimum cost and maximum allowable completion time 
for reconstruction projects, requirements for minimum annual deposits 
and the requirement that any vessel acquired with CCF funds must be 
reconstructed, regardless of vessel condition. The new regulations 
would also add a restriction that the CCF program (program) would not 
allow withdrawals of funds for projects that increase harvesting 
capacity.

DATES: NMFS invites the public to comment on this proposed rule. 
Comments on the proposed rule must be received by November 10, 2014.

ADDRESSES: You may submit comments on this document, identified by 
NOAA-NMFS-2013-0144, by any one of the following methods:
     Electronic Submission: Submit all electronic public 
comments via the Federal e-Rulemaking Portal. Go to: https://www.regulations.gov/#!docketDetail;D=NOAA-NMFS-2013-0144, Click the 
``Comment Now!'' icon, complete the required fields and enter or attach 
your comments.
     Mail: Submit written comments to Paul Marx, Financial 
Services Division (FSD), NMFS-MB5, 1315 East-West Highway, Silver 
Spring, MD 20910; or
     Fax: 301-713-1939; Attn: Richard VanGorder.
    Instructions: Comments sent by any other method, to any other 
address or individual, or received after the end of the comment period, 
may not be considered by NMFS. All comments received are a part of the 
public record and will generally be posted for public viewing on 
www.regulations.gov without change. All personal identifying 
information (e.g., name, address, etc.), confidential business 
information, or otherwise sensitive information submitted voluntarily 
by the sender will be publicly accessible. NMFS will accept anonymous 
comments (enter ``N/A'' in the required fields if you wish to remain 
anonymous). Attachments to electronic comments will be accepted in 
Microsoft Word, Excel, or Adobe PDF file formats only.
    Copies of the Regulatory Impact Review/Initial Regulatory 
Flexibility Analysis (RIR/IRFA) prepared for this action may be 
obtained from the mailing address above or by calling Richard VanGorder 
(see FOR FURTHER INFORMATION CONTACT).
    Send comments regarding the burden-hour estimates or other aspects 
of the collection-of-information requirements contained in this 
proposed rule to Richard VanGorder at the address specified above and 
also to the Office of Information and Regulatory Affairs, Office of 
Management and Budget (OMB), Washington, DC 20503 (Attention: NOAA Desk 
Officer) or email to OIRASubmission@omb.eop.gov, or fax to 
(202) 395-7825.

FOR FURTHER INFORMATION CONTACT: Richard VanGorder at 301-427-8784 or 
via email at Richard.VanGorder@noaa.gov.

SUPPLEMENTARY INFORMATION:

Background

    This proposed rule revises and replaces the CCF regulations found 
at 50 CFR part 259.
    The program was established by the Merchant Marine Act of 1970. The 
CCF was authorized by Section 607 of the Merchant Marine Act, 1936, as 
amended, 46 U.S.C. 1177 (now at 46 U.S.C. 53503) and is administered 
pursuant to 50 CFR part 259.
    The purpose of the program is to assist owners and operators of 
United States flagged vessels in accumulating the large amount of 
capital necessary for the modernization and expansion of the U.S. 
merchant marine fleet and to provide economic support for the U.S. 
fishing industry. The extensive vessel reconstruction requirements in 
the current regulations no longer make sense given the improved status 
of the merchant marine fleet.
    The program encourages construction, reconstruction, or acquisition 
of vessels through deferment of Federal income taxes. Owners and 
operators of vessels deposit income from fishing into CCF accounts 
prior to paying income taxes. All deferred taxes are eventually 
recovered upon the sale of the vessel because the cost basis of the 
vessel is reduced by the dollar amount of CCF funds used for its 
purchase or improvements. The program was deemed necessary because 
operators of U.S.-flagged vessels are faced with a competitive 
disadvantage in the construction and replacement of their vessels 
relative to foreign-flagged operators, whose vessels are registered in 
countries that do not tax fishing income. The program helps 
counterbalance this situation through its tax-deferral privileges.
    To participate in the program, a vessel owner submits an 
application to the Financial Services Division of the National Marine 
Fisheries Service in advance of the relevant Federal tax filing due 
date. The application identifies the income earning vessel(s), the type 
of project(s) anticipated and the financial institution that will hold 
the CCF deposits. Once the Secretary of Commerce deems an application 
compliant with the CCF statute and regulations, a CCF Agreement is 
executed between the United States and the vessel owner or operator.
    Currently, there are 1,634 CCF Agreements with a total of 
approximately $263M on deposit. Many of these CCF Agreements were 
established years ago and identify scheduled projects that are no 
longer viable. Consequently, CCF participants are faced with either 
having funds languish on deposit for nonviable scheduled projects or 
making a non-qualified withdrawal of funds and paying deferred taxes at 
the highest marginal rate.
    The authority to make regulatory changes to the program is granted 
under 46 U.S.C. 53502(a), which permits the

[[Page 57497]]

Secretary of Commerce to prescribe regulations (except for the 
determination of tax liability) to carry out the program. The program 
regulations were last amended in 1997 to permit reconstruction projects 
for safety improvements.
    The proposed changes to the CCF regulations are intended to ease 
the current restrictions on the allowable uses of CCF funds while 
remaining consistent with current agency priorities of maintaining 
sustainable fisheries. For example, currently, reconstruction is 
required when using CCF funds to acquire a used vessel. Reconstruction 
is mandated regardless of the condition of the vessel. Consequently, 
the CCF participant must often invest money in unnecessary capital 
improvements. If this requirement is eliminated and the definition of a 
``qualified reconstruction'' is changed, a large portion of the funds 
that are currently on deposit could be used for projects that are 
actually needed, rather than required by now-outdated regulations. 
Additionally, these changes would allow the Government to recapture 
deferred taxes.
    The Proposed Rule:
    1. Revises Sec.  259.31(a) to eliminate the requirement that the 
Agreement holder reconstruct a used vessel acquired with CCF funds 
(redesignated Sec.  259.3(a)). This would eliminate the requirement to 
reconstruct vessels, because not all purchased vessels need 
improvement;
    2. Revises Sec.  259.31(b) to eliminate the requirement that the 
minimum cost of a reconstruction project be the lesser of $100,000 or 
20% of the reconstructed vessel's acquisition cost. This provision 
would eliminate making excessive capital improvements to vessels based 
upon an arbitrary amount. Instead, program participants would use the 
CCF to spend what is needed to improve the vessel. It also would remove 
Sec.  259.31(b)(2), which tiers off of the minimum cost requirement 
(redesignated Sec.  259.3(c)), now eliminated;
    3. Revises Sec.  259.31(b)(1) to add material increases in safety, 
reliability, or energy efficiency to the list of qualified 
reconstruction items.
    4. Revises Sec.  259.31(c) to specify that a reconstruction or 
construction be completed within 12 months of commencement. The 
original regulations allowed for up to 18 months to complete 
reconstruction projects in order to allow program participants an 
extended period of time to meet the minimum cost requirements. Since 
the minimum cost requirement for reconstructions is eliminated, there 
would be no need for an extended period to complete planned projects.
    5. Eliminates the requirement in Sec.  259.34(a) that the Agreement 
holder annually make a minimum deposit of 2% of the anticipated cost of 
the scheduled Agreement objectives. The Proposed rule would also 
eliminate paragraphs (a)(1) and (2) of Sec.  259.34 pertaining to the 
minimum cost requirement, now eliminated. This proposed change would be 
consistent with our attempt to reduce the amount of CCF funds on 
deposit by not requiring excess deposits to meet an annual deposit 
requirement;
    6. Adds the requirement that any project done with CCF funds cannot 
add to the harvesting capacity of any fishery. This addition would 
ensure consistency with the agency's larger responsibility to maintain 
sustainable fisheries (new Sec.  259.3(a), (b), and (c)), and reflects 
the CCF's current policy; and
    7. Removes Sec.  259.32 pertaining to ``Conditional Fisheries.'' 
``Conditional Fisheries'' regulations were part of the Financial Aid 
Program Procedures contained in 50 CFR part 251 and were eliminated on 
April 3, 1996, under the authority of 16 U.S.C. 742.
    Sections are redesignated as necessary due to these changes.
    In addition to the changes easing restrictions on CCF projects, 
program regulations would be amended as follows for purposes of 
simplicity, clarity, and brevity:
    1. A Definitions section would be added (new Sec.  259.1);
    2. Existing Sec.  259.1 would be removed because it deals only with 
deposits for taxable years beginning after December 31, 1969, and 
before January 1, 1972, and no such deposits remain;
    3. Section 259.30 would be redesignated as Sec.  259.2. Proposed 
Sec.  259.2(b)(1) would add the requirement that the application for an 
Agreement include the name and Tax Identification Number of the 
applicant, pursuant to the Debt Collection Improvement Act of 1996 (31 
U.S.C. 3701, et seq.);
    4. Section 259.31 is redesignated as Sec.  259.3 and would add a 
prohibition against using CCF funds for any vessel acquisition, 
construction, or reconstruction that increases fisheries harvesting 
capacity, to be consistent with the agency's larger responsibility to 
maintain sustainable fisheries;
    5. Proposed Sec.  259.3(a) would simplify the term ``Acquisition'' 
by removing the existing requirements when acquiring a used vessel and 
would add the requirement that the acquired vessel must replace an 
existing or recently sunken vessel, to ensure that the acquired vessel 
does not add to the fisheries' harvesting capacity (the replaced vessel 
must lose its fisheries trade endorsement);
    6. Proposed Sec.  259.3(b) is a new section pertaining specifically 
to the term ``Construction,'' which had been omitted as a separate 
section in the existing regulations, and to clarify that Construction 
of a vessel, like Acquisition, could not add fisheries harvesting 
capacity, in accordance with current NMFS fisheries policy;
    7. Proposed Sec.  259.3(c) replaces old Sec.  259.31(b), and would 
simplify the definition of Reconstruction by incorporating the relevant 
language regarding energy and safety improvements from the deleted 
Sections 259.31(d) and (e);
    8. Proposed Sec.  259.3(d) replaces old Sec.  259.31(c) and would 
change the time permitted for construction and reconstruction projects 
from 18 months to 12 months.
    9. Section 259.33 would be redesignated as Sec.  259.4;
    10. Section 259.34 would be redesignated as Sec.  259.5 and would 
eliminate the minimum deposit requirement;
    11. Proposed Sec.  259.6 would be added to provide for termination 
of inactive accounts and accounts with zero balances on deposit, and to 
detail the notification procedures and time limit for resolving 
Agreement deficiencies to avoid termination;
    12. Section 259.35 would be redesignated as Sec.  259.7, and the 
requirement to submit a preliminary deposit and withdrawal report at 
the end of each calendar year would be removed, because the preliminary 
report no longer serves a useful purpose and is not required by the 
Internal Revenue Service;
    13. Section 259.36 would be redesignated as Sec.  259.8, and 
provisions relating to non-cash deposits or investments would be 
dropped because they have never occurred;
    14. Section 259.37 would be redesignated as Sec.  259.9; and
    15. Section 259.38 would be redesignated as Sec.  259.10.

Classification

    This proposed rule is published under the authority of, and is 
consistent with, Chapter 535 of the Shipping Act. The NMFS Assistant 
Administrator has determined that this proposed rule is consistent with 
the Magnuson-Stevens Fishery Conservation and Management Act, as 
amended, and other applicable law, subject to further consideration 
after public comment.

[[Page 57498]]

    This proposed rule has been determined to be not significant for 
purposes of Executive Order 12866.
    In addition to public comment about the proposed rule's substance, 
NMFS also seeks public comment on any ambiguity or unnecessary 
complexity arising from the language used in this proposed rule.
    In compliance with the National Environmental Policy Act, NMFS 
prepared an environmental assessment (EA) for this proposed rule. The 
assessment discusses the impact of this proposed rule on the natural 
and human environment and integrates a Regulatory Impact Review (RIR) 
and an Initial Regulatory Flexibility Analysis (IRFA). NMFS will send 
the assessment, the review and analysis to anyone who requests a copy 
(see ADDRESSES).
    NMFS prepared an IRFA, as required by section 603 of the Regulatory 
Flexibility Act (RFA), to describe the economic impacts this proposed 
rule, if adopted, would have on small entities. The analysis will aid 
us in considering regulatory alternatives that could minimize the 
economic consequences on affected small entities. The proposed rule 
does not duplicate or conflict with other Federal regulations.

Summary of IRFA

    The RFA defines a small business as having the same meaning as a 
``small business concern'' which is defined under Section 3 of the 
Small Business Act (SBA). Additionally, ``small governmental 
jurisdictions'' are defined as governments of cities, counties, towns, 
townships, villages, school districts, or special districts with 
populations of fewer than 50,000. As defined in the RFA, the small 
entities that this rule may affect include vessel owners, vessel 
operators, fish dealers, individual fishermen, small corporations, 
others engaged in commercial and recreational activities regulated by 
NOAA and native Alaskan governmental jurisdictions. In addition, the 
rule would affect some larger businesses. Notably for new participants, 
since the CCF is a voluntary program that provides tax deferred 
benefits to qualified applicants, we assume that no entities large or 
small would be negatively impacted by this rule. For current 
participants, the changes allow more flexibility in the use of the 
funds and, therefore, would only positively affect those entities.

Description of the Number of Small Entities

    Most participants in the program have annual gross revenues of less 
than $5.5 million for shellfish, $20.5 million for finfish and $7.5 
million for other fishing. The IRFA analysis estimates that most of the 
1634 active program participants are considered small entities. 
Furthermore, because analysts cannot quantify the exact number of small 
entities that may be directly regulated by this action, a definitive 
finding of non-significance for the proposed action under the RFA is 
not possible. However, because the proposed action would not result in 
additional compliance obligations, operating costs or any other costs 
on small entities, the net effects would be expected to be minimal 
relative to the status quo.
    Since the new regulations merely simplify existing CCF regulations 
and policies, this action will not create new reporting requirements 
for small entities participating in the CCF. Although the CCF requires 
certain supporting documentation during the life of the Agreement, the 
CCF's requirements do not impose unusual burdens. Those supporting 
documents are usually within the normal business records already 
maintained by small business entities, and include income tax returns, 
tax basis schedules, vessel ownership documents, etc. Depending on 
circumstances, the CCF may require other supporting documents that can 
be acquired at reasonable cost if they are not already available. We 
estimate it will take small entities fewer than 3.5 hours per 
application to meet these requirements.
    Because participation is voluntary and requires an average of 3.5 
hours to prepare an application, all CCF applicants are assumed to have 
made a determination that using the program incurs a benefit. 
Consequently, it is assumed that the CCF's tax deferrals provide a 
positive economic impact. Importantly, the CCF does not regulate or 
manage the affairs of its program users, and the regulations impose no 
additional compliance obligations, operating costs or any other costs 
on small entities.
    Because these regulations will impose no significant costs on any 
small entities, but rather will provide small and large entities with 
benefits, negative economic impacts on small entities, if any, are 
expected to be minimal at worst. The impact is likely to be positive. 
Accordingly, this rule will not substantially impact a significant 
number of small businesses.

Paperwork Reduction Act

    Notwithstanding any other provisions of law, no person is required 
to respond to or be subject to a penalty for failure to comply with a 
collection of information subject to the requirements of the Paperwork 
Reduction Act (PRA) unless that collection of information displays a 
currently valid Office of Management and Budget (OMB) control number.
    This proposed rule contains no new collection of information 
requirements subject to the PRA. Existing collections have been 
approved by OMB under OMB Control No. 0648-0041. This collection 
includes the Deposit/Withdrawal Report, the Interim Capital 
Construction Fund Agreement and Certificate. The estimate of the annual 
total program public reporting burden for the Deposit/Withdrawal report 
is 1,200 hours. This equates to an average of less than 1 hour of 
annual reporting burden per program user. The estimates of the annual 
total program public reporting burden for the Interim Capital 
Construction Fund Agreement and Certificate is 2,250 hours. This 
equates to an average of 1 hour of annual reporting burden per existing 
program user and 3.5 hours of reporting burden for new applicants to 
the CCF program. The response time estimates above include the time 
needed for reviewing instructions, searching existing data sources, 
gathering and maintaining the data needed, and completing and revising 
the collection of information.
    Send comments regarding the burden hour estimates, or any other 
aspect of this data collection, including suggestions for reducing the 
burden, to both NMFS and OMB (see ADDRESSES).
    The Assistant Administrator for Fisheries, NMFS, determined that 
this proposed rule will not affect the coastal zone of any state.
    The Assistant Administrator for Fisheries, NMFS, determined that 
this proposed rule will not affect endangered or threatened species, 
marine mammals, or critical habitat.
    This proposed rule does not contain policies with federalism 
implications under E.O. 13132.

List of Subjects in 50 CFR Part 259

    Fisheries, Fishing vessels, Income taxes, Reporting and 
recordkeeping requirements.

    Dated: September 18, 2014.
Samuel D. Rauch III,
Deputy Assistant Administrator for Regulatory Programs, National Marine 
Fisheries Service.


0
For the reasons set out in the preamble, NMFS proposes to revise 50 CFR 
part 259 to read as follows:

PART 259--CAPITAL CONSTRUCTION FUND TAX REGULATIONS

[[Page 57499]]

Sec.
259.1 Definitions.
259.2 Applying for a Capital Construction Fund Agreement 
(``Agreement'').
259.3 Acquisition, construction, or reconstruction.
259.4 Constructive deposits and withdrawals; ratification of 
withdrawals (as qualified) made without first having obtained 
Secretary's consent; first tax year for which an Agreement is 
effective.
259.5 Maximum deposits and time to deposit.
259.6 Termination of inactive and zero balance accounts.
259.7 Annual deposit and withdrawal reports required.
259.8 CCF accounts.
259.9 Conditional consents to withdrawal qualification.
259.10 Miscellaneous.

    Authority: 46 U.S.C. 53501, formerly 46 U.S.C. App. 1177 and 
1177-1.


Sec.  259.1  Definitions.

    Act means Chapter 535 of Title 46 of the U.S. Code (46 U.S.C. 
53501-53517), as may be amended from time to time.
    Agreement means the contract to participate in the program between 
the approved CCF applicant (party) and the Secretary.
    Agreement vessel means any eligible vessel or qualified vessel 
which is subject to an Agreement.
    Citizen of the United States means any person who is a United 
States citizen and any corporation or partnership organized under the 
laws of any state which meets the requirements for documenting vessels 
in the U.S. coastwise trade.
    Commercial fishing means fishing in which the fish harvested, 
either in whole or in part, are intended to enter commerce or enter 
commerce through sale, barter or trade.
    Depository means the bank or brokerage account(s) listed in the 
Agreement where the CCF funds will be physically held.
    Eligible vessel means--
    (1) A vessel--
    (i) Constructed in the United States (and, if reconstructed, 
reconstructed in the United States), constructed outside of the United 
States but documented under the laws of the United States on April 15, 
1970, or constructed outside the United States for use in the United 
States foreign trade pursuant to a contract made before April 15, 1970;
    (ii) Documented under the laws of the United States; and
    (iii) Operated in the foreign or domestic commerce of the United 
States or in the fisheries of the United States; and
    (2) A commercial fishing vessel--
    (i) Constructed in the United States and, if reconstructed, 
reconstructed in the United States;
    (ii) Of at least 2 net tons but fewer than 5 net tons;
    (iii) Owned by a citizen of the United States;
    (iv) Having its home port in the United States; and
    (v) Operated in the commercial fisheries of the United States.
    Extension period means the first day following the end of the 
Filing period and ending on the last day of the party's last filing 
extension.
    Filing period means the first day following the end of the Tax Year 
and ending on the party's last day to file their tax return absent a 
filing extension.
    Qualified vessel means--
    (1) A vessel--
    (i) Constructed in the United States (and, if reconstructed, 
reconstructed in the United States), constructed outside of the United 
States but documented under the laws of the United States on April 15, 
1970, or constructed outside the United States for use in the United 
States foreign trade pursuant to a contract made before April 15, 1970;
    (ii) Documented under the laws of the United States; and
    (iii) Agreed, between the Secretary and the person maintaining the 
capital construction fund established under 46 U.S.C. 53503, to be 
operated in the fisheries of the United States; and
    (2) A commercial fishing vessel--
    (i) Constructed in the United States and, if reconstructed, 
reconstructed in the United States;
    (ii) Of at least 2 net tons but fewer than 5 net tons;
    (iii) Owned by a citizen of the United States;
    (iv) Having its home port in the United States; and
    (v) Operated in the commercial fisheries of the United States; and
    (3) Gear which is permanently fixed to the vessel. The expenditure 
for gear and certain nets which are not fixed to the vessel (pots, 
traps, longline, seine nets, gill set nets and gill drift nets) is 
excluded from the amount eligible for qualified withdrawals of CCF 
funds.
    Schedule A means the section of the Agreement that designates the 
income producing vessel from which deposits are made to a designated 
account.
    Schedule B means the section of the Agreement that designates the 
qualified project for which the CCF funds are to be expended.
    Secretary means the Secretary of Commerce with respect to eligible 
or qualified vessels operated or to be operated in the fisheries of the 
United States.
    Tax due date means the date the party's Federal tax return must be 
filed, including extensions, with the Internal Revenue Service.
    Tax year means the period between January 1 and December 31 for 
Calendar year filers or the designated fiscal year for fiscal year 
filers.
    United States means the United States of America and, for 
citizenship purposes, includes the Commonwealth of Puerto Rico, 
American Samoa, Guam, the U.S. Virgin Islands, the Republic of the 
Marshall Islands, the Federated States of Micronesia, the Commonwealth 
of the Northern Mariana Islands, and any other commonwealth, territory, 
or possession of the United States, or any political subdivision of any 
of them.


Sec.  259.2  Applying for a Capital Construction Fund Agreement 
(``Agreement'').

    (a) General qualifications. To be eligible to enter into an 
Agreement an applicant must:
    (1) Be a citizen of the United States (citizenship requirements are 
those necessary for documenting vessels in the coastwise trade within 
the meaning of section 2 of the Shipping Act, 1916, as amended);
    (2) Own or lease one or more eligible vessels (as defined at 46 
U.S.C. 53501) operating in the foreign or domestic commerce of the 
United States;
    (3) Have an acceptable plan to acquire, construct, or reconstruct 
one or more qualified vessels (as defined at 46 U.S.C. 53501). The plan 
must be a firm representation of the applicant's actual intentions. 
Qualified vessels must be for commercial operation in the fisheries of 
the United States. If the vessel is 5 net tons or over, it must be 
documented with a fishery trade endorsement. Dual documentation in both 
the fisheries and the coastwise trade of the United States is 
permissible. Any vessel which will carry fishing parties for hire must 
be inspected and certified (under 46 CFR part 176) by the U.S. Coast 
Guard as qualified to carry more than six passengers. If the vessel 
weighs fewer than 5 net tons the party must demonstrate to the 
Secretary's satisfaction that the carrying of fishing parties for hire 
will constitute its primary activity.
    (b) Content of application. Applicants seeking an Agreement must 
submit a formal application providing the following information:
    (1) Name and Tax Identification Number (TIN) of applicant;
    (2) Proof of U.S. citizenship;
    (3) The first taxable year for which the Agreement is to apply (see 
Sec.  259.4 for the latest time at which applications for an Agreement 
relating to the previous taxable year may be received);

[[Page 57500]]

    (4) The following information regarding each eligible vessel which 
is to be incorporated in Schedule A of the Agreement:
    (i) Name of vessel,
    (ii) Official number or, in the case of vessels weighing under 5 
net tons, the State registration number, where required,
    (iii) Type of vessel (i.e., catching vessel, processing vessel, 
transporting vessel, charter vessel, barge, passenger carrying fishing 
vessel, etc.),
    (iv) General characteristics (i.e., net tonnage, fish-carrying 
capacity, age, length, type of fishing gear, number of passengers 
carried or in the case of vessels operating in the foreign or domestic 
commerce the various uses of the vessel, etc.),
    (v) Whether it is owned or leased and, if leased, the name of the 
owner, and a copy of the lease,
    (vi) Date and place of construction,
    (vii) If reconstructed, date of redelivery and place of 
reconstruction,
    (viii) Trade (or trades) in which the vessel is documented and date 
last documented,
    (ix) The fishery of operation (which in this section means each 
species or group of species). Each species must be specifically 
identified by the acceptable common names of fish, shellfish, or other 
living marine resources which each vessel catches, processes, or 
transports or will catch, process, or transport for commercial purposes 
such as marketing or processing the catch),
    (x) The area of operation (which for fishing vessels means the 
general geographic areas in which each vessel will catch, process, or 
transport, or charter for each species or group of species of fish, 
shellfish, or other living marine resources),
    (5) The specific objectives to be achieved by the accumulation of 
assets in a Capital Construction Fund (to be incorporated in Schedule B 
of the Agreement) including:
    (i) Number of vessels,
    (ii) Type of vessel (i.e., catching, processing, transporting, or 
passenger carrying fishing vessels),
    (iii) General characteristics (i.e., net tonnage, fish-carrying 
capacity, age, length, type of fishing gear, number of passengers 
carried),
    (iv) Cost of projects,
    (v) Amount of indebtedness to be paid for vessels to be 
constructed, acquired, or reconstructed (all notes, mortgages, or other 
evidence of indebtedness must be submitted as soon as available, 
together with sufficient additional evidence to establish that full 
proceeds of the indebtedness to be paid from a CCF account under an 
Agreement, were used solely for the purpose of the construction, 
acquisition, or reconstruction of Schedule B vessels),
    (vi) Date of construction, acquisition, or reconstruction,
    (vii) Fishery of operation (which in this section means each 
species or group of species must be specifically identified by 
acceptable common name of fish, shellfish, or other living marine 
resources), and
    (viii) Area of operation (which in this section means the general 
geographic areas in which each vessel will operate for each species or 
group of species of fish, shellfish, or other living marine resources),
    (c) Filing. The application must be signed and submitted to the 
Financial Services Division of the National Marine Fisheries Service. 
As a general rule, the Agreement must be executed and entered into by 
the taxpayer on or prior to the due date for the filing of the Federal 
tax return in order to be effective for the tax year to which that 
return relates. It is manifestly in the Applicant's best interest to 
file at least 45 days in advance of such date.


Sec.  259.3  Acquisition, construction, or reconstruction.

    CCF funds cannot be used for any vessel acquisition, construction, 
or reconstruction that increases harvesting capacity.
    (a) Acquisition. CCF funds can be used to replace an existing or a 
recently sunken vessel and its existing harvesting capacity. The 
replaced vessel must lose its fisheries trade endorsement and the 
vessel owner must notify the Coast Guard Documentation Center of that 
fact.
    (b) Construction. CCF funds can be used to construct a vessel to 
replace an existing vessel, or a recently sunken vessel and its 
existing harvesting capacity.
    (c) Reconstruction. Reconstruction may include rebuilding, 
replacing, reconditioning, refurbishing, repairing, converting and/or 
improving any portion of a vessel. A reconstruction project must, 
however, either substantially prolong the useful life of the 
reconstructed vessel, increase its value, materially increase its 
safety, reliability, or energy efficiency, or adapt it to a different 
commercial use in the fishing trade or industry. No vessel more than 25 
years old at the time of withdrawal shall be a qualified vessel for the 
purpose of reconstruction unless a special showing is made, to the 
Secretary's discretionary satisfaction, that the type and degree of 
reconstruction intended will result in an efficient and productive 
vessel with an economically useful life of at least 10 years beyond the 
date reconstruction is completed.
    (d) Time permitted for construction or reconstruction. Construction 
or reconstruction must be completed within 12 months from the date 
construction or reconstruction first commences, unless otherwise 
consented to by the Secretary.


Sec.  259.4  Constructive deposits and withdrawals; ratification of 
withdrawals (as qualified) made without first having obtained 
Secretary's consent; first tax year for which an Agreement is 
effective.

    (a) Constructive deposits and withdrawals (before Agreement 
executed date). Constructive deposits and withdrawals are deemed to 
have been deposited to and withdrawn from a designated CCF account even 
though the funds were not physically deposited. Constructive deposits 
and withdrawals shall be permissible only during the ``Tax Year'' for 
which a written application for an Agreement is submitted to the 
Secretary. Once the Secretary executes the Agreement, the constructive 
deposit and withdrawal period ends. All deposits must be physically 
deposited into a designated CCF account.
    (1) All qualified deposits and expenditures occurring within the 
period specified directly above, that are within the eligible ceilings 
specified at 46 U.S.C. 53505, may be consented to by the Secretary as 
constructive deposits and withdrawals. In order for the Secretary to 
provide his or her consent for constructive deposit and withdrawal 
treatment, the applicant must include a written request with the 
application and provide sufficient supporting data to enable the 
Secretary to evaluate the request. This written request must be 
submitted no later than the ``Extension Period'' for that party's 
initial tax year.
    (2) [Reserved]
    (b) Constructive deposits and withdrawals (after the Agreement 
effective date). The Secretary shall not permit constructive deposits 
or withdrawals after the effective date of an Agreement. Deposits made 
after the effective date of an Agreement must be physically deposited 
into a dedicated CCF account.
    (c) First tax year for which an Agreement is effective. In order 
for an Agreement to be effective for any applicant's ``Tax Year,'' the 
written application must be submitted to the Secretary before the end 
of the ``Filing Period'' or ``Extension Period'' for that tax year, 
whichever applies. If the written application is received by the 
Secretary, after the end of the ``Filing

[[Page 57501]]

Period'' or ``Extension Period,'' whichever applies, then the Agreement 
will be first effective for the next succeeding ``Tax Year.''
    (1) It is in the applicant's best interest to submit his or her 
written application at least 45 days in advance of the end of his or 
her tax due date. If the written application is submitted too close to 
the tax due date, and the Secretary is not ultimately able to execute 
the Agreement, the applicant must bear the burden of negotiating with 
the Internal Revenue Service for relief. The Secretary shall regard any 
penalties related to this denied application as due to the applicant's 
failure to apply for an Agreement in a timely manner.
    (2) [Reserved]
    (d) Ratification of withdrawals, as qualified, made without first 
having obtained Secretary's prior consent. Any withdrawals made after 
the effective date of an Agreement without the Secretary's consent are 
automatically non-qualified withdrawals, unless the Secretary 
subsequently consents to them by ratification.
    (1) The Secretary may ratify, as qualified, any withdrawal made 
without the Secretary's prior consent, provided the withdrawal would 
have resulted in the Secretary's consent had it been requested before 
withdrawal.
    (2) The Secretary may issue his or her retroactive consent, if 
appropriate, as work priorities permit. However, if the Secretary is 
unable to issue retroactive consent for withdrawals made without his or 
her consent, then those withdrawals, and any associated penalties, will 
be deemed due to the party's failure to apply in a timely manner.
    (3) It is recommended that a party submit his or her request for 
withdrawal at least 45 days in advance of the expected date of 
withdrawal. Withdrawals made without the Secretary's consent, in 
reliance on obtaining the Secretary's consent, are made purely at a 
party's own risk. Should any withdrawal made without the Secretary's 
consent prove, for any reason, to be one which the Secretary will not 
or cannot consent to ratify, then the result will be an unqualified 
withdrawal and/or an involuntary termination of the Agreement.
    (4) Should a party withdraw CCF funds for a project not previously 
deemed an eligible Schedule B objective without having first obtained 
the Secretary's consent, the Secretary may entertain an application to 
amend the Agreement's Schedule B objectives as the prerequisite to 
consenting by ratification to the withdrawal.
    (5) Redeposit of any withdrawals made without the Secretary's 
consent, and for which such consent is not subsequently given (either 
by ratification or otherwise), shall not be permitted. If the non-
qualified withdrawal adversely affects the Agreement's general status 
the Secretary may terminate the Agreement.


Sec.  259.5  Maximum deposit amounts and time to deposit.

    (a) Other than the maximum annual ceilings established by the Act, 
the Secretary shall not establish an annual ceiling. However, deposits 
can no longer be made once a party has deposited 100 percent of the 
anticipated cost of all Schedule B objectives unless the Agreement is 
then amended to establish additional Schedule B objectives.
    (b) Ordinarily, the Secretary shall permit deposits to accumulate 
prior to commencement of any given Schedule B objective for a maximum 
of ten years. However, at the Secretary's sole discretion and based on 
good and sufficient cause shown, the time period may be extended.


Sec.  259.6  Termination of inactive and zero balance accounts.

    (a) If a Schedule B objective has not commenced within 10 years 
from the date the Agreement was established, and has not been extended 
by written approval of the Secretary, the Agreement is considered 
inactive and subject to termination.
    (b) If the account balance of all depositories of an Agreement is 
zero dollars 10 years after the date it was established, and has not 
been extended through amendment, the Agreement is considered inactive 
and subject to termination unless its Schedule B objective has 
commenced.
    (c) A certified letter will be sent to holders of Agreements 
identified for termination informing them that the agreement will 
terminate 60 days after the date of the letter unless the deficiencies 
identified in the letter are addressed.


Sec.  259.7  Annual deposit and withdrawal reports required.

    (a) The Secretary will require from each party an annual deposit 
and withdrawal report for each CCF depository. Failure to submit such 
reports may be cause for involuntary termination of the party's 
Agreement.
    (1) A final deposit and withdrawal report at the end of the tax 
year, which shall be submitted not later than 30 days after expiration 
of the due date, for filing the party's Federal income tax return. The 
report must be made on a form prescribed by the Secretary using a 
separate form for each CCF depository.
    (2) Each report must bear a certification that the deposit and 
withdrawal information given includes all annual deposit and withdrawal 
activity for each CCF depository. Negative reports must be submitted in 
those cases where there is no deposit and/or withdrawal activity.
    (b) The Secretary, at his or her discretion, may, after due notice, 
disqualify withdrawals and/or involuntarily terminate the Agreement for 
the participant's failure to submit the required annual deposit and 
withdrawal reports.
    (c) Additionally, each party shall submit, not later than 30 days 
after expiration of the party's tax due date, a copy of the party's 
Federal Income Tax Return filed with IRS for the preceding tax year. 
Failure to submit the Federal Income Tax Return shall, after due 
notice, be cause for the same adverse action specified in the paragraph 
above.


Sec.  259.8  CCF accounts.

    (a) General. Each CCF account in a scheduled depository shall have 
an account number, which must be reflected on the reports required by 
Sec.  259.7. All CCF accounts shall be reserved only for CCF 
transactions. There shall be no intermingling of CCF and non-CCF 
transactions and there shall be no pooling of 2 or more CCF accounts 
without the prior consent of the Secretary. Safe deposit boxes, safes, 
or the like shall not be eligible CCF depositories without the 
Secretary's consent, which shall be granted solely at his or her 
discretion.
    (b) Assignment. The use of funds held in a CCF depository for 
transactions in the nature of a countervailing balance, compensating 
balance, pledge, assignment, or similar security arrangement shall 
constitute a material breach of the Agreement unless prior written 
consent of the Secretary is obtained.
    (c) Depositories. Section 53506(a) of the Act provides that amounts 
in a CCF account must be kept in a depository or depositories specified 
in the Agreements and be subject to such trustee or other fiduciary 
requirements as the Secretary may require. Unless otherwise specified 
in the Agreement, the party may select the type or types of accounts in 
which the assets of the Fund may be deposited.


Sec.  259.9  Conditional consents to withdrawal qualification.

    The Secretary may conditionally consent to the qualification of a 
withdrawal. This consent is conditioned

[[Page 57502]]

upon the timely submission, to the Secretary, of the items requested by 
the Secretary in the withdrawal approval letter. Failure to provide 
these items in a timely manner, and after due notice, will result in 
nonqualification of the withdrawal and/or involuntary termination of 
the Agreement.


Sec.  259.10  Miscellaneous.

    (a) Wherever the Secretary prescribes time constraints, the 
postmark date shall control if mailed. If a private delivery service is 
used, including Federal Express or United Parcel Service, the date 
listed on the label shall control. Submission of CCF transactions by 
email or facsimile is only allowable when an original signature is not 
required.
    (b) All CCF information received by the Secretary shall be held 
strictly confidential to the extent permitted by law, except that it 
may be published or disclosed in statistical form provided such 
publication does not disclose, directly or indirectly, the identity of 
the fund holder.
    (c) While recognizing that precise regulations are necessary in 
order to treat similarly situated parties similarly, the Secretary also 
realizes that precision in regulations can sometimes cause inequitable 
effects to result from unavoidable, unintended, or minor discrepancies 
between the regulations and the circumstances they attempt to govern. 
The Secretary will, consequently, at his or her discretion, as a matter 
of privilege and not as a matter of right, attempt to afford relief to 
parties where literal application of the purely procedural, as opposed 
to substantive, aspects of these regulations would otherwise work an 
inequitable hardship. This privilege will be sparingly granted and no 
party should act in reliance on its being granted.
    (d) These Sec. Sec.  259.1 through 259.10 are applicable to all 
Agreements first entered into (or amended) on or after the date these 
sections are adopted.
    (e) These Sec. Sec.  259.1 through 259.10 are specifically 
incorporated in all present Agreements.

[FR Doc. 2014-22821 Filed 9-24-14; 8:45 am]
BILLING CODE 3510-22-P