Capital Construction Fund; Fishing Vessel Capital Construction Fund Procedures, 24561-24568 [2017-11083]

Agencies

• DEPARTMENT OF COMMERCE
• National Oceanic and Atmospheric Administration

[Federal Register Volume 82, Number 102 (Tuesday, May 30, 2017)]
[Rules and Regulations]
[Pages 24561-24568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11083]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 259

[Docket No. 080410551-7410-02]
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: Final rule.

-----------------------------------------------------------------------

SUMMARY: NMFS hereby amends 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 
eliminate the minimum cost 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 also prohibit withdrawals of funds under 
the CCF program (program) for projects that increase harvesting 
capacity, unless the project is subject to a limited access system in 
which the fisheries management authority establishes harvesting limits.

DATES: Effective June 29, 2017.

ADDRESSES: Copies of the Environmental Assessment/Regulatory Impact 
Review/Final Regulatory Flexibility Analysis (EA/RIR/FRFA) prepared for 
this action may be obtained from Paul Marx, Chief, Financial Services 
Division, NMFS, Attn: Capital Construction Fund Rulemaking, 1315 East-
West Highway, Silver Spring, MD 20910 or by calling Richard VanGorder 
(see FOR FURTHER INFORMATION CONTACT) or on the Capital Construction 
Fund Web site at https://www.nmfs.noaa.gov/mb/financial_services/ccf.htm.
    Send comments regarding the burden-hour estimates or other aspects 
of the collection-of-information requirements contained in this final 
rule to Richard VanGorder at the address specified above and also to 
the Office of Information and Regulatory Affairs, Office of Management 
and Budget (OMB), Washington, DC 20503 (Attention: NOAA Desk Officer) 
or email to OIRA_Submission@omb.eop.gov, or fax to (202) 395-7825.

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

SUPPLEMENTARY INFORMATION:

Background

    This final rule revises and replaces the CCF regulations found at 
50 CFR part 259.
    The program was established by the Merchant Marine Act of 1936 
(MMA), ch. 858, title VI, sec. 607(a), 49 Stat. 2005 (1936) (current 
version at 46 U.S.C. 53503 (2007) 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 of the U.S. merchant marine 
fleet. 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.
    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 1,394 CCF Agreements with a total of 
approximately $270M 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 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 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

[[Page 24562]]

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.

Summary of Comments and Reponses

    The proposed rule (79 FR 57496, September 25, 2014) solicited 
public comments through November 10, 2014. During the comment period, 
NMFS received comments from eight individuals and twenty-six entities. 
The twenty-six entities include companies that currently participate in 
the CCF program, CCF representatives, trade associations and 
environmental groups. Most individuals and entities made multiple 
comments in one document. Comments were generally in favor of the 
changes made in the proposed rule but many expressed concerns over 
certain provisions. The specific comments and our responses are as 
follows.
    Comment 1: Four individuals and twenty-four entities are opposed to 
adding harvesting capacity restrictions to acquisition, construction 
and reconstruction projects.
    Response: NMFS agrees that a purpose of the rule is to prohibit any 
project activity from increasing harvesting in a fishery, as opposed to 
affecting harvesting capacity Therefore, the language is modified to 
prohibit CCF funds from being used for vessel acquisition, 
construction, or reconstruction that increases harvesting capacity 
other than in a limited access system in which the fisheries management 
authority establishes harvesting limits. In a limited access system in 
which the fisheries management authority establishes harvesting limits, 
increased capacity will not lead to increased harvesting above the 
limit set at the fishery level.
    Comment 2: One entity believes that the proposed harvesting 
capacity restrictions are not restrictive enough.
    Response: As indicated in the response to Comment 1, NMFS believes 
that prohibiting CCF funds from being used in a manner that increases 
harvesting capacity is only necessary for fisheries where there is not 
an established limited access system under a management system which 
provides adequate safeguards to ensure the goal of maintaining 
sustainable fisheries is met.
    Comment 3: Five individuals and nineteen entities are opposed to 
reducing the timeframe to complete construction and reconstruction from 
eighteen months to twelve months. In addition, one individual and four 
entities proposed increasing the allowable timeframe up to thirty six 
months.
    Response: NMFS agrees that reducing the allowable timeframe to 
complete construction and reconstruction projects may cause an 
unintended burden on CCF program users. NMFS realizes that building 
new, safer and more fuel efficient vessels may take more than the 
proposed twelve month period. Thus, the final rule maintains the 
current eighteen month timeframe in accordance with existing 
regulations. NMFS believes that the majority of CCF projects will be 
completed in eighteen months. NMFS has the authority to grant 
extensions for projects which may require more time to complete.
    Comment 4: One individual and six entities stated that the 
definition of an eligible and qualified vessel includes only vessels 
fewer than five net tons and excludes Coast Guard documented vessels.
    Response: In response to public comments, NMFS has revised the rule 
to include vessels which are five net tons or greater and Coast Guard 
documented vessels as eligible and qualified. NMFS agrees that the 
exclusion of these vessels was unintended and erroneous.
    Comment 5: Eight entities stated that the proposed changes were 
contrary to the original statutory intent of the CCF program to 
modernize the US fishing fleet and support domestic shipyards.
    Response: The original statutory intent for the CCF program was to 
assist owners and operators of United States flagged vessels in 
accumulating the large amount of capital necessary for the 
modernization of the U.S. merchant marine fleet. The extensive vessel 
reconstruction requirements in the current regulations no longer make 
sense given the improved status of the merchant marine fleet. The 
changes made in this final rule eliminate provisions that no longer 
meet the needs of CCF participants and simplify the regulations to 
better implement the purposes of the underlying statute. These 
amendments eliminate the minimum cost 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. NMFS feels that this final rule is consistent with 
the original purpose and intent of the statute.
    Comment 6: Two individuals and seven entities opined that the 
stated rationale for the proposed changes were not justified and that 
the proposed changes impose unnecessary restrictions and less 
flexibility.
    Response: NMFS disagrees and maintains that certain provisions of 
the current regulations no longer make sense given the status of the 
merchant marine fleet. These changes impose no additional burdens on 
program users. The changes reduce the burdens imposed by simplifying 
the regulations to eliminate the minimum cost 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. These changes should bring the program 
into greater alignment with the current needs of program users and 
retain flexibility when undertaking CCF projects.
    Comment 7: One individual and one entity stated that the 
elimination of the minimum deposit requirement will interfere with the 
goals of the CCF program and may result in termination of CCF 
agreements.
    Response: The intent of the changes is to prevent forcing 
participants to deposit funds that are not necessary to complete 
qualified projects. These changes are consistent with the goals of the 
CCF program to set aside funds for specific projects to be completed in 
a timely manner. CCF Agreements will only be terminated if they are 
deemed inactive. While CCF Agreements may be terminated for inactivity, 
participants may apply again in the future for a new Agreement if 
desired.
    Comment 8: One individual has requested that NMFS keep small 
businesses in mind when constructing the final regulations.
    Response: The final rule has been constructed with the intent 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 changes are intended to 
benefit all CCF program users including small businesses.
    Comment 9: Two individuals and eight entities stated that 
harvesting capacity is not defined in the proposed rule.
    Response: NMFS agrees that harvesting capacity is not specifically 
defined. However, Agreements involving projects that occur within a 
limited access system in which fisheries management authority 
establishes

[[Page 24563]]

harvesting limits will not be affected by any limitations on harvesting 
capacity.
    Comment 10: One individual stated that the CCF program should be 
shut down.
    Response: The individual did not provide reasoning as to why the 
program should be eliminated. Congress has identified a need to 
modernize and expand the US fishing industry. The CCF program is 
designed to meet this need.
    Comment 11: One entity requested that former 50 CFR 259.36(c)(3), 
which was removed in the proposed rule, be added back to the final 
rule.
    Response: Former 50 CFR 259.36(c)(3) allowed for non-cash deposits 
or investments as approved depositories. The commenter stated that he 
had used this provision in the former regulation to include installment 
sales contracts as CCF assets when the required cash deposit from a 
vessel sale was not available in the year of sale. NMFS believes that 
this commenter's use of this provision is erroneous. 46 U.S.C. 53506 
specifies that ``Amounts in a capital construction fund shall be kept 
in the depository specified in the agreement and shall be subject to 
trustee and other fiduciary requirements prescribed by the Secretary. 
Except as provided in subsection (b) [stock investments], amounts in 
the fund may be invested only in interest-bearing securities approved 
by the Secretary.'' An installment sales contract does not meet the 
definition of an allowable CCF investment as specified in the statute.
    Comment 12: One entity stated that the operation of charter vessels 
that allow customers to harvest fish for their own use does not appear 
to meet the proposed definition for a commercial fishing vessel and, 
therefore, would make them ineligible for CCF participation.
    Response: NMFS has revised the definitions for eligible and 
qualified vessels to specifically allow for charter vessels.
    Comment 13: One entity stated that the termination of inactive and 
zero balance accounts under 50 CFR 259.6 is contrary to Internal 
Revenue Code (IRC) section 7518(g)(5). The assertion was that such 
termination was contrary to this section because it provides that funds 
are only treated as non-qualified if they have been on deposit for more 
than twenty five years.
    Response: The commenter is confusing two separate authorities that 
govern the CCF program relating to time constraints. The IRC section 
7518(g)(5) allows for the Secretary to treat funds that have been on 
deposit for more than twenty five years as non-qualified in years 
twenty six through thirty at specified percentages and taxed 
accordingly. Section 259.6 of this final rule separately allows for the 
Secretary to terminate CCF Agreements that have not undertaken a 
qualified project in the last ten years. The purpose of this section is 
to terminate inactive accounts. These two sections are not related and, 
therefore, do not contradict each other.
    Comment 14: One entity stated that the ten year period to complete 
a project should commence as of the last amendment date and not the 
start date of the Agreement.
    Response: NMFS disagrees that the ten year period to begin a 
project should start as of the last amendment date. The requirement to 
do at least one project every ten years existed in the prior CCF 
regulation. The final rule does not change this requirement. The CCF 
program was created to modernize the US fishing fleet and support 
domestic shipyards. NMFS believes that requiring CCF program users to 
utilize their CCF funds for a qualified project at least once every ten 
years is reasonable. Extending the project start date by amendment 
could lead to continual extensions without ever undertaking a project 
which would not be consistent with the underlying intent of the statute 
to modernize the US fishing fleet.
    Comment 15: One entity believes that the rule prohibits 
electronically signed documents.
    Response: NMFS agrees that it would be advantageous to permit 
electronic submission of documents that require an original signature. 
At this time, we do not have the capabilities to accept electronic 
signatures. NMFS is optimistic that the option to file using an 
electronic signature will be available to program users in the future.
    Comment 16: One entity stated that there is no ``grandfather'' 
clause in the new regulations.
    Response: The applicability of the final rule to all past, present 
and future Agreements can be found in 50 CFR 259.10(d) and (e).
    Comment 17: One entity has requested that NMFS add a restriction to 
the rule that no project be allowed which does not reduce ocean noise 
pollution.
    Response: NMFS is in support of projects that reduce ocean noise 
pollution. However, NMFS believes the more appropriate forum for 
limiting noise pollution is through the Magnuson-Stevens Fishery 
Conservation and Management Act Fisheries Management Plans.
    Comment 18: Two entities believe that the Environmental Assessment 
prepared by NMFS lacked the detail required by the National 
Environmental Policy Act (NEPA) specifically in regards to the 
potential impacts of adding the harvesting capacity restrictions and 
twelve month timeframe constraints.
    Response: NMFS believes that the changes made in this final rule 
are largely administrative in nature and the implementation of this 
final action should have a nominal, if any, impact on the physical, 
biological, social and economic environments. Agreements involving 
projects that occur within a limited access system in which the 
fisheries management authority establishes harvesting limits will not 
be affected by any limitations on harvesting capacity. In addition, the 
final rule maintains the current eighteen month timeframe in accordance 
with existing regulations, rather than reducing the timeframe to twelve 
months as had been proposed.

Summary of Revisions in the Final Rule

    1. Revises Sec.  259.31(a) (redesignated Sec.  259.3(a)) to 
eliminate the requirement that the Agreement holder reconstruct a used 
vessel acquired with CCF funds. This permits the acquisition of a used 
vessel without requiring that it be reconstructed;
    2. Revises Sec.  259.31(b) (redesignated Sec.  259.3(c)) 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 eliminates making excessive capital 
improvements to vessels based upon an arbitrary amount. Instead, 
program participants will use the CCF to spend what is needed to 
improve the vessel. It also removes Sec.  259.31(b)(2) because it was 
tied to the now eliminated minimum cost requirement;
    3. Revises Sec.  259.31(b)(1) (redesignated Sec.  259.4(a)) to add 
material increases in safety, reliability, or energy efficiency to the 
list of qualified reconstruction items.
    4. 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 Final rule also eliminates the 
minimum cost requirement in paragraphs (a)(1) and (2) of Sec.  259.34. 
This change is consistent with our attempt to reduce the amount of CCF 
funds on deposit by not requiring excess deposits to meet an annual 
deposit requirement;
    5. Removes Sec.  259.32 pertaining to ``Conditional Fisheries.'' 
``Conditional Fisheries'' regulations were part of the Financial Aid 
Program Procedures

[[Page 24564]]

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 are amended as follows for purposes of simplicity, 
clarity, and brevity:
    1. A Definitions section is added (new Sec.  259.1);
    2. Existing Sec.  259.1 is 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 is redesignated as Sec.  259.2. Section 
259.2(b)(1) adds 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 259.3(a) simplifies ``Acquisition'' requirements by 
removing the existing requirements when acquiring a used vessel;
    5. Section 259.3(b) is a new section pertaining specifically to 
``Construction,'' which had been omitted as a separate section in the 
previous regulations;
    6. Section 259.3(c) replaces old Sec.  259.31(b), and simplifies 
the requirements related to ``Reconstruction'' by incorporating the 
relevant language regarding energy and safety improvements from the 
deleted Sections 259.31(d) and (e);
    7. Section 259.33 is redesignated as Sec.  259.4;
    8. Section 259.34 is redesignated as Sec.  259.5 and eliminates the 
minimum deposit requirement;
    9. Section 259.6 is 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;
    10. Section 259.35 is redesignated as Sec.  259.7, and the 
requirement to submit a preliminary deposit and withdrawal report at 
the end of each calendar year is removed, because the preliminary 
report no longer serves a useful purpose and is not required by the 
Internal Revenue Service;
    11. Section 259.36 is redesignated Sec.  259.8, and provisions 
relating to non-cash deposits or investments are dropped because they 
have never occurred;
    12. Section 259.37 is redesignated as Sec.  259.9; and
    13. Section 259.38 is redesignated as Sec.  259.10.

Classification

    This final rule is published under the authority of, and is 
consistent with, Chapter 535 of the MMA. The NMFS Assistant 
Administrator has determined that this final rule is consistent with 
the Magnuson-Stevens Fishery Conservation and Management Act, as 
amended, and other applicable law.
    This final rule has been determined to be not significant for 
purposes of Executive Order 12866.
    In compliance with the National Environmental Policy Act, NMFS 
prepared an environmental assessment (EA) for this final rule. The 
assessment discusses the impact of this final rule on the natural and 
human environment and integrates a Regulatory Impact Review (RIR) and a 
Final Regulatory Flexibility Analysis (FRFA). NMFS will send the 
assessment, the review and analysis to anyone who requests a copy (see 
ADDRESSES).
    NMFS prepared a FRFA, under section 604 of the Regulatory 
Flexibility Act (RFA), to describe the economic impacts this final rule 
has on small entities. The analysis aided us in considering regulatory 
alternatives that could minimize the economic consequences on affected 
small entities. The final rule does not duplicate or conflict with 
other Federal regulations.

Summary of FRFA

    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). 5 U.S.C. 601(3). 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. 5 U.S.C. 601(5). 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 affects some larger 
businesses.
    Because the CCF is a voluntary program that provides tax deferred 
benefits to qualified applicants, we assume that newly participating 
entities large or small will not be negatively impacted by this rule. 
For current participants, the changes allow more flexibility in the use 
of the funds and, therefore, will only positively affect those 
entities.

Description of the Number of Small Entities

    The small business size standard for businesses, including their 
affiliates, whose primary industry is commercial fishing is $11 million 
in annual gross receipts (see 50 CFR part 200.2(a)). Most of the 1,394 
participants in the program, all of who are fishers, have annual gross 
revenues of less than $11 million, and are thus considered to be small 
entities. However, analysts cannot quantify the exact number of small 
entities that may choose to participate in the program and be directly 
regulated by this action, the net effects are expected to be positive 
relative to the status quo.
    Because the new regulations merely simplify existing CCF 
regulations and policies, this action does 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 they will incur a benefit by participating in 
the program. 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 that did not exist in the 
original regulations.
    Because these regulations impose no significant costs on any small 
entities, but rather 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, we 
have determined this rule does not substantially impact a significant 
number of small businesses.
    Section 212 of the Small Business Regulatory Enforcement Fairness 
Act of 1996 states that, for each rule or group

[[Page 24565]]

of related rules for which an agency is required to prepare a FRFA, the 
agency shall publish one or more guides to assist small entities in 
complying with the rule, and shall designate such publications as 
``small entity compliance guides.'' Even though a FRFA was not 
required, one was prepared. Copies of the FRFA are available upon 
request (see ADDRESSES). The information in this FRFA supports a 
determination that this rule will have beneficial effects on affected 
small entities. Therefore, NMFS has determined that this final rule 
will not have a substantial adverse economic impact on a substantial 
number of small entities. Since a FRFA was not required, ``small entity 
compliance guides'' will not be prepared.

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 final 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 final rule does not affect the coastal zone of any state.
    The Assistant Administrator for Fisheries, NMFS, determined that 
this final rule does not affect endangered or threatened species, 
marine mammals, or critical habitat.
    This final 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: May 24, 2017.
Alan D. Risenhoover,
Acting Deputy Assistant Administrator for Regulatory Programs, National 
Marine Fisheries Service.

    For the reasons set out in the preamble, NMFS amends 50 CFR Chapter 
II by revising part 259 to read as follows:

PART 259--CAPITAL CONSTRUCTION FUND TAX REGULATIONS

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.

    As used in this part:
    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 if 5 net tons 
or greater; 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 or vessel which will carry fishing 
parties for hire--
    (i) Constructed in the United States and, if reconstructed, 
reconstructed in the United States;
    (ii) State registered if at least 2 net tons but fewer than 5 net 
tons or Documented under the laws of the United States if 5 net tons or 
greater;
    (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.
    Limited Access System means a system that limits participation in a 
fishery to those satisfying certain eligibility criteria or 
requirements contained in a fishery management plan or associated 
regulation.
    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 if 5 net tons 
or greater; and

[[Page 24566]]

    (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 or vessel which will carry fishing 
parties for hire--
    (i) Constructed in the United States and, if reconstructed, 
reconstructed in the United States;
    (ii) State registered if at least 2 net tons but fewer than 5 net 
tons or Documented under the laws of the United States if 5 net tons or 
greater;
    (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);
    (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

[[Page 24567]]

return relates. It is 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 in a fishery or 
fisheries, other than in a limited access system in which the fisheries 
management authority establishes harvesting limits.
    (a) Acquisition. CCF funds can be used to acquire any used 
qualified vessel that will fish in a limited access system in which the 
fisheries management authority establishes harvesting limits. If the 
fishery or fisheries is not a limited access system, CCF funds can only 
be used to replace an existing, recently sunken, or scrapped 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 new 
qualified vessel that will fish in a limited access system in which the 
fisheries management authority establishes harvesting limits. If the 
fishery or fisheries is not a limited access system, CCF funds can only 
be used to replace an existing, recently sunken, or scrapped 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.
    (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 18 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 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

[[Page 24568]]

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 paragraph (b) 
of this section.


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 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 Agreements existing prior to the date these 
sections are adopted.
[FR Doc. 2017-11083 Filed 5-26-17; 8:45 am]
BILLING CODE 3510-22-P