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Federal Register / Vol. 71, No.

174 / Friday, September 8, 2006 / Rules and Regulations 53009

§ 181.7 [Amended] and technical assistance in developing for claiming the railroad track
■ 4. § 181.7 is amended as follows: and modernizing the civil aviation maintenance credit under section 45G of
■ A. In paragraph (b): By removing infrastructure; and the Internal Revenue Code for qualified
‘‘Assistant Secretary of State for (b) * * * Agreements on the subjects railroad track maintenance expenditures
Congressional Relations’’ and adding in listed in paragraphs (a)(10) through (13) paid or incurred by a Class II railroad or
its place ‘‘Assistant Legal Adviser for of this section that had not been Class III railroad and other eligible
Treaty Affairs’’; and removing ‘‘House published as of September 8, 2006. taxpayers during the taxable year. These
Committee on Foreign Affairs’’ and * * * * * temporary regulations reflect changes to
adding in its place ‘‘House Committee (d) The Assistant Legal Adviser for the law made by the American Jobs
on International Relations’’. Treaty Affairs shall annually submit to Creation Act of 2004 and the Gulf
■ B. In paragraph (c): Congress a report that contains an index Opportunity Zone Act of 2005. The text
■ 1. By removing ‘‘, the negotiations, the of all international agreements, listed by of these temporary regulations also
effect of the agreement,’’ in the third country, date, title, and summary of serves as the text of the proposed
sentence; and each such agreement (including a regulations set forth in the notice of
■ 2. By removing, in the last sentence description of the duration of activities proposed rulemaking on this subject in
the phrase ‘‘Assistant Secretary of State under the agreement and the agreement the Proposed Rules section in this issue
for Congressional Relations’’ and adding itself), that the United States: of the Federal Register.
in its place ‘‘Assistant Legal Adviser for (1) Has signed, proclaimed, or with DATES: Effective Date: These regulations
Treaty Affairs’’, and removing the reference to which any other final are effective September 8, 2006.
phrase‘‘House Committee on Foreign formality has been executed, or that has Applicability Date: For dates of
Affairs’’ and adding in its place ‘‘House been extended or otherwise modified, applicability, see § 1.45G–1T(g).
Committee on International Relations’’. during the preceding calendar year; and FOR FURTHER INFORMATION CONTACT:
■ C. In paragraph (d), by removing (2) Has not been published, or is not Winston H. Douglas, (202) 622–3110
‘‘Assistant Secretary of State for proposed to be published, in the (not a toll-free number).
Congressional Relations’’ and ‘‘Assistant compilation entitled ‘‘United States SUPPLEMENTARY INFORMATION:
Secretary for Congressional Relations’’ Treaties and Other International
wherever each appears and adding in its Agreements.’’ Paperwork Reduction Act
place ‘‘Assistant Legal Adviser for ■ 6. Add new § 181.9 to read as follows: These temporary regulations are being
Treaty Affairs’’. issued without prior notice and public
§ 181.9 Internet Web site publication. procedure pursuant to the
■ 5. § 181.8 is amended as follows by:
■ A. Adding paragraphs (a)(10) through The Office of the Assistant Legal Administrative Procedure Act (5 U.S.C.
(13); Adviser for Treaty Affairs, with the 553). For this reason, the collection of
■ B. Adding a sentence to the end of cooperation of other bureaus in the information contained in these
paragraph (b); and Department, shall be responsible for regulations has been reviewed, and
■ C. Adding a new paragraph (d) to read making publicly available on the pending receipt and evaluation of
as follows: Internet Web site of the Department of public comments, approved by the
State each treaty or international Office of Management and Budget under
§ 181.8 Publication. agreement proposed to be published in control number 1545–2031. Responses
(a) * * * the compilation entitled ‘‘United States to this collection of information are
(10) Bilateral agreements with other Treaties and Other International mandatory.
governments that apply to specific Agreements’’ not later than 180 days An agency may not conduct or
activities and programs financed with after the date on which the treaty or sponsor, and a person is not required to
foreign assistance funds administered agreement enters into force. respond to, a collection of information
by the United States Agency for Dated: August 21, 2006. unless the collection of information
International Development pursuant to John J. Kim, displays a valid control number.
the Foreign Assistance Act, as amended, For further information concerning
Assistant Legal Adviser for Treaty Affairs,
and the Agricultural Trade Development Department of State. this collection of information, and
and Assistance Act of 1954, as where to submit comments on the
[FR Doc. E6–14850 Filed 9–7–06; 8:45 am]
amended; collection of information and the
BILLING CODE 4710–08–P
(11) Letters of agreements and accuracy of the estimated burden, and
memoranda of understanding with other suggestions for reducing this burden,
governments that apply to bilateral please refer to the preamble to the cross-
assistance for counter-narcotics and DEPARTMENT OF THE TREASURY referencing notice of proposed
other anti-crime purposes furnished rulemaking published in the Proposed
pursuant to the Foreign Assistance Act, Internal Revenue Service
Rules section of this issue of the Federal
as amended; Register.
(12) Bilateral agreements that apply to 26 CFR Parts 1 and 602
Books and records relating to a
specified education and leadership [TD 9286] collection of information must be
development programs designed to retained as long as their contents may
acquaint U.S. and foreign armed forces, RIN 1545–BE91
become material in the administration
law enforcement, homeland security, or of any internal revenue law. Generally,
Railroad Track Maintenance Credit
related personnel with limited, tax returns and tax return information
specialized aspects of each other’s AGENCY: Internal Revenue Service (IRS), are confidential, as required by 26
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practices or operations; and Treasury. U.S.C. 6103.


(13) Bilateral agreements between ACTION: Temporary regulations.
aviation agencies governing specified Background
aviation technical assistance projects for SUMMARY: This document contains This document contains amendments
the provision of managerial, operational, temporary regulations that provide rules to 26 CFR part 1 to provide regulations

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53010 Federal Register / Vol. 71, No. 174 / Friday, September 8, 2006 / Rules and Regulations

under section 45G of the Internal taxpayer, QRTME, rail facilities, property that is provided directly to,
Revenue Code (Code). Section 45G was railroad-related property, and railroad- and is unique to, a railroad. Further, this
added to the Code by section 245(a) of related services. The temporary property must be property that, in the
the American Jobs Creation Act of 2004, regulations also instruct an eligible hands of a Class II railroad or Class III
Public Law 108–357 (118 Stat. 1418) taxpayer how to determine the RTMC railroad, is described in asset classes
(AJCA), and was modified by section for the taxable year. Further, the 40.1 through 40.54 of Rev. Proc. 87–56
403(f) of the Gulf Opportunity Zone Act temporary regulations provide guidance (1987–2 CB 674), with certain
of 2005, Public Law 109–135 (119 Stat. on assignments of miles of railroad track modifications, and is described in the
2577). for purposes of section 45G, adjustments STB property accounts for grading,
to basis for the RTMC, and the treatment tunnels and subways, and storage
General Overview
of controlled groups under section 45G. warehouses.
Section 38 allows a credit for the The temporary regulations define
taxable year for, among other things, the Explanation of Provisions railroad-related services as meaning
current year business credit. The current Eligible Taxpayer services that are provided directly to,
year business credit is the sum of the and are unique to, a railroad. In
credits listed in section 38(b). Section The temporary regulations provide addition, these services must relate to
245(c)(1) of the AJCA amended section that only an eligible taxpayer may claim railroad shipping, loading and
38(b) of the Code to add to the list of the RTMC. An eligible taxpayer is unloading of railroad freight, or repairs
credits the railroad track maintenance defined in the temporary regulations as: of rail facilities or railroad-related
credit (RTMC) determined under section (1) A Class II railroad or Class III property. Examples of railroad-related
45G(a). railroad during the taxable year; (2) any services are the transport of freight by
Section 45G(a) provides that, for person that transports property using rail, the loading and unloading of freight
purposes of section 38, the RTMC for the rail facilities of a Class II railroad or transported by rail, locomotive leasing
the taxable year is an amount equal to Class III railroad during the taxable year; or rental, and maintenance of a
50 percent of the qualified railroad track or (3) any person that furnishes railroad- railroad’s right-of-way (including
maintenance expenditures (QRTME) related property or railroad-related vegetation control). Examples of
paid or incurred by an eligible taxpayer services to a Class II railroad or Class III services that are not railroad-related
during the taxable year. Section 45G(d) railroad during the taxable year. A Class services are general business services,
defines the term QRTME to mean I railroad is an eligible taxpayer only if cleaning services, banking services
expenditures (whether or not chargeable the Class I railroad is in the second or (including financing of railroad-related
to capital account) for maintaining third category above and is assigned property), and office building rental.
railroad track owned by, or leased to, a miles of railroad track for the taxable
year by a Class II railroad or Class III Computation of Railroad Track
Class II railroad or Class III railroad as
railroad. A taxpayer in the second or Maintenance Credit
of January 1, 2005. Section 45G(e)
defines the terms Class II railroad and third category is an eligible taxpayer For purposes of section 38, the
Class III railroad to have the respective only with respect to the miles of temporary regulations provide that the
meanings given those terms by the railroad track assigned to the person for RTMC generally is equal to 50 percent
Surface Transportation Board (STB). the taxable year by a Class II railroad or of the QRTME paid or incurred by an
Section 45G(c) defines an eligible Class III railroad. eligible taxpayer during the taxable
taxpayer to mean any Class II railroad or Consistent with section 45G(e)(1), the year. However, this credit amount
Class III railroad, and any person who temporary regulations provide that the cannot exceed the credit limitation
transports property using the rail terms Class II railroad and Class III provided by the temporary regulations.
facilities of such a railroad, or who railroad have the respective meanings The credit limitation for a Class II
furnishes railroad-related property or given these terms by the STB. As railroad or Class III railroad differs from
services to such a railroad, but only determined by the STB, Class II the credit limitation for other eligible
with respect to miles of railroad track railroads have annual carrier operating taxpayers.
assigned to such person by such a revenues of less than $250 million but If an eligible taxpayer is a Class II
railroad. in excess of $20 million after applying railroad or Class III railroad, the
Section 45G(b) imposes limitations on the railroad revenue deflator formula temporary regulations provide that the
the amount of the RTMC for any taxable (Current Year’s Revenues x (1991 RTMC cannot exceed $3,500 multiplied
year. The credit allowed under section Average Railroad Freight Price Index/ by the sum of: (1) The number of miles
45G(a) may not exceed $3,500 Current Year’s Average Railroad Freight of railroad track owned or leased by the
multiplied by the sum of (1) the number Price Index)). 49 CFR part 1201, subpart Class II railroad or Class III railroad
of miles of railroad track owned by, or A, § 1–1(a). In general, Class III railroads within the United States at the close of
leased to, the eligible taxpayer as of the have annual carrier operating revenues its taxable year (‘‘eligible railroad
close of the taxable year, and (2) the of $20 million or less after applying the track’’), reduced by the number of miles
number of miles of railroad track railroad revenue deflator formula. 49 of eligible railroad track assigned by the
assigned to the eligible taxpayer by a CFR part 1201, subpart A, § 1–1(a). Class II railroad or Class III railroad to
Class II railroad or Class III railroad that The temporary regulations also another eligible taxpayer for that year;
owns or leases the track as of the close provide that the rail facilities of a Class and (2) the number of miles of eligible
of the taxable year. II railroad or Class III railroad include railroad track owned or leased by
Section 45G applies to QRTME paid railroad yards, tracks, bridges, tunnels, another Class II railroad or Class III
or incurred during taxable years wharves, docks, stations, and other railroad that are assigned to the Class II
beginning after December 31, 2004, and related assets that are used in the railroad or Class III railroad for the
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before January 1, 2008. transport of freight by a railroad and taxable year.


that are owned or leased by the Class II If an eligible taxpayer is not a Class
Scope railroad or Class III railroad. II railroad or Class III railroad, the
The temporary regulations define Railroad-related property is defined in temporary regulations provide that the
several terms, including eligible the temporary regulations as meaning RTMC cannot exceed $3,500 multiplied

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Federal Register / Vol. 71, No. 174 / Friday, September 8, 2006 / Rules and Regulations 53011

by the number of miles of eligible Assignment of Railroad Track Miles during a taxable year will need to file
railroad track assigned to the eligible For purposes of section 45G, the Form 8900 even though the assignor is
taxpayer by a Class II railroad or Class temporary regulations provide that an not claiming any RTMC for that year.
III railroad for the taxable year. As required by the temporary
assignment of a mile of railroad track is
regulations, an assignor must attach to
Determination of QRTME Paid or not a legal transfer of title, but merely
its Form 8900 an information statement
Incurred a designation. This designation must be
identifying the name and taxpayer
in writing and must include the names
identification number (TIN) of each
The temporary regulations provide and taxpayer identification numbers of
assignee, the total number of the
that QRTME is equal to the amount of the Class II railroad or Class III railroad
assignor’s eligible railroad track miles,
expenditures paid or incurred during (assignor) making, and the eligible
the number of eligible railroad track
the taxable year by an eligible taxpayer taxpayer (assignee) receiving, the
miles assigned by the assignor to each
for maintaining railroad track, roadbed, assignment of eligible railroad track
assignee for the taxable year, and the
bridges, and related track structures that miles, the date of this assignment, and total number of eligible railroad track
are located within the United States and the number of miles of eligible railroad miles assigned by the assignor to all
owned or leased as of January 1, 2005, track that is assigned by the assignor to assignees for the taxable year. Further,
by a Class II railroad or Class III the assignee for a taxable year. The an eligible taxpayer (assignee) that
railroad. These expenditures may or regulations also provide that the received an assignment of railroad track
may not be chargeable to a capital designation need not specify the miles during its taxable year from an
account. The regulations also define location of the assigned mile of eligible assignor Class II railroad or Class III
railroad track, roadbed, bridges, and railroad track and the assigned mile of railroad and that claims the RTMC for
related track structures as meaning eligible railroad track does not have to that taxable year must attach to its Form
property described in certain STB correspond to the mile of eligible 8900 a statement providing the total
property accounts (‘‘qualifying railroad railroad track on which the QRTME is number of eligible railroad track miles
structure’’). paid or incurred by an eligible taxpayer. assigned to the assignee for the taxable
Consistent with section 45G(b), the year and attesting that the assignee has
The temporary regulations also define
temporary regulations provide that only in writing, and has retained as part of
the term ‘‘paid or incurred’’ with respect
a Class II railroad or Class III railroad the assignee’s records for purposes of
to a taxpayer using an accrual method
may assign a mile of eligible railroad § 1.6001–1(a), information identifying
of accounting. In this case, paid or track. Thus, if a Class II railroad or Class
incurred means a liability incurred the name and TIN of each assignor
III railroad assigns a railroad track mile railroad, the date of each assignment,
within the meaning of § 1.446– to an eligible taxpayer, the assignee is
1(c)(1)(ii). Consequently, a liability may and the number of eligible railroad track
not permitted to reassign any eligible miles assigned by each assignor railroad
not be taken into account under section railroad track mile to another eligible
45G prior to the taxable year during for the assignee’s taxable year. If the
taxpayer. The regulations also provide Federal income tax return of a Class II
which the liability is incurred. Further, that the maximum number of miles of
the temporary regulations provide that railroad or Class III railroad, or another
eligible railroad track that may be eligible taxpayer, for a taxable year
QRTME is not paid or incurred during assigned by a Class II railroad or Class
the taxable year to the extent that a ending after December 31, 2004, and
III railroad (assignor) for any taxable ending before September 7, 2006, is
taxpayer is entitled to reimbursement of year are the total miles of eligible
any such expenditures. The temporary filed before October 10, 2006, and the
railroad track owned by, or leased to, Class II railroad, Class III railroad, or
regulations provide that reimbursements the assignor reduced by the eligible
may consist of amounts paid either other eligible taxpayer wants to apply
railroad track miles that the assignor the temporary regulations to that taxable
directly or indirectly to the taxpayer. retains for itself in determining the
Examples of indirect reimbursements year but did not include with that return
RTMC. the applicable information statement
are discounted freight shipping rates, The temporary regulations also
price markups of railroad-related specified above, the regulations require
provide that the assignment is treated as the information statement to be attached
property, debt forgiveness, or other being made by the Class II railroad or
similar arrangements. Thus, the to the taxpayer’s next filed Federal
Class III railroad at the close of Class II income tax return or to the taxpayer’s
temporary regulations limit the QRTME railroad’s or Class III railroad’s taxable
paid or incurred to the actual out-of- amended Federal income tax return
year in which the assignment is made. filed pursuant to the effective date
pocket expenditures paid or incurred by The assignee takes the assignment into provisions in the temporary regulations
a taxpayer. account for its taxable year that includes (discussed later), provided this
If an eligible taxpayer (assignee) pays the date the assignment is treated as amended return is filed before the
a Class II railroad or Class III railroad being made by the assignor railroad taxpayer’s next filed Federal income tax
(assignor) an amount in exchange for an under the preceding sentence. return.
assignment of one or more miles of The temporary regulations require The temporary regulations also
eligible railroad track, the temporary that a taxpayer must file Form 8900, address situations in which a Class II
regulations provide that the amount is ‘‘Qualified Railroad Track Maintenance railroad or Class III railroad (assignor)
treated as QRTME paid or incurred by Credit,’’ with its timely filed (including assigns more miles of eligible railroad
the assignee, and not the assignor extensions) Federal income tax return track than the total number of miles that
railroad, at the time and to the extent for the taxable year for which the it owns or that are leased to it at the end
the assignor pays or incurs QRTME. taxpayer: (1) Claims the RTMC; (2) of the taxable year in which the
Consistent with the preceding assigns any miles of eligible railroad assignment is made. If the assignor does
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paragraph, this QRTME would be track; or (3) receives an assignment of not own or have leased to it any eligible
reduced by any direct or indirect any miles of eligible railroad track. railroad track at the end of that year, the
reimbursements made to the assignee Thus, for example, a Class II railroad or temporary regulations provide that any
during the taxable year with respect to Class III railroad (assignor) that assigns assignment made during that year is not
that assignment. all of its miles of eligible railroad track valid, regardless of whether the

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53012 Federal Register / Vol. 71, No. 174 / Friday, September 8, 2006 / Rules and Regulations

assignment is properly reported. includes income realized in any form, Advocacy of the Small Business
Similarly, if an assignor assigns more whether in money, property, or services. Administration for comment on their
miles of eligible railroad track than it Section 45G does not provide, and its impact on small business.
owned or are leased to it as of the end legislative history does not refer to, any
Drafting Information
of the taxable year in which the exception to this rule. Accordingly,
assignment is made, the temporary pursuant to section 61 and the The principal author of these
regulations provide that the assignment regulations under section 61, the owner regulations is Winston H. Douglas,
is valid only with respect to the name of the tangible assets (for example, Office of the Associate Chief Counsel
of the assignee and the number of miles railroad track and roadbed) with respect (Passthroughs and Special Industries).
listed by the assignor on the information to which the QRTME is paid or incurred However, other personnel from the IRS
statement attached to its Form 8900 for by another person that does not have a and Treasury Department participated
that year and only to the extent of the depreciable interest in those assets has in their development.
maximum number of miles of eligible gross income in the amount of that List of Subjects
railroad track that may be assigned by QRTME. However, the application of
the assignor Class II railroad or Class III section 61 to QRTME paid or incurred 26 CFR Part 1
railroad for the taxable year. with respect to eligible railroad track Income taxes, Reporting and
that is leased by a Class II railroad or recordkeeping requirements.
Special Rules
Class III railroad raises a question as to
The temporary regulations provide under what circumstances the owner or 26 CFR Part 602
rules for adjusting basis for the amount lessee should recognize gross income Reporting and recordkeeping
of the RTMC claimed by an eligible with respect to QRTME. The IRS and requirements.
taxpayer. All or some of the QRTME Treasury Department request comments
paid or incurred by an eligible taxpayer on this issue. Amendments to the Regulations
during the taxable year may be required Finally, if an eligible taxpayer is a ■ Accordingly, 26 CFR parts 1 and 602
to be capitalized under section 263(a) as member of a controlled group of are amended as follows:
a tangible asset or as an intangible asset corporations, section 45G(e)(2) provides
(see, for example, § 1.263(a)–4(d)(8), that rules similar to rules of section PART 1—INCOME TAXES
which generally requires capitalization 41(f)(1) apply. Accordingly, the
of amounts paid or incurred by a temporary regulations provide rules ■ Paragraph 1. The authority citation
taxpayer to produce or improve real similar to those of § 1.41–6T for for part 1 continues to read in part as
property owned by another). The basis determining the amount of the follows:
of the tangible asset or intangible asset controlled group’s RTMC, and rules for Authority: 26 U.S.C. 7805 * * *
includes the capitalized amount of the allocating the credit among members of
QRTME. Thus, for purposes of section ■ Par. 2. Section 1.45G–0T is added to
the group.
45G(e)(3), the regulations provide that read as follows:
railroad track is qualifying railroad Effective Date
§ 1.45G–0T Table of contents for the
structure (railroad track, roadbed, These temporary regulations apply to railroad track maintenance credit rules
bridges, and related track structures) taxable years ending on or after the date (temporary).
and intangible assets to which the these regulations are filed in the Federal This section lists the major
QRTME is capitalized. Register and beginning before January 1, paragraphs contained in § 1.45G–1T.
Consequently, if an eligible taxpayer 2008. However, a taxpayer may apply
claims the RTMC, the temporary the temporary regulations to taxable § 1.45G–1T Railroad track maintenance
regulations provide that the adjusted years beginning after December 31, credit (temporary).
basis of these tangible and intangible 2004, and ending before these (a) In general.
assets must be reduced by the amount regulations are filed in the Federal (b) Definitions.
of the RTMC allowable. This reduction Register, provided that the taxpayer (1) Class II railroad and Class III
is taken into account at the time the applies all provisions in these railroad.
QRTME is paid or incurred by an regulations to the taxable year. (2) Eligible railroad track.
eligible taxpayer and before the (3) Eligible taxpayer.
depreciation deduction is determined Special Analyses (4) Qualifying railroad structure.
for the taxable year for which the RTMC It has been determined that this (5) Qualified railroad track
is allowable. If the amount of the Treasury decision is not a significant maintenance expenditures.
QRTME is capitalized to more than one regulatory action as defined in (6) Rail facilities.
asset (for example, railroad track and Executive Order 12866. Therefore, a (7) Railroad-related property.
regulatory assessment is not required. It (8) Railroad-related services.
bridges), whether tangible or intangible,
(9) Railroad track.
the reduction to the basis of these assets also has been determined that section
(10) Form 8900.
is allocated among each of the assets 553(b) of the Administrative Procedure (11) Examples.
subject to the reduction in proportion to Act (5 U.S.C. chapter 5) does not apply (c) Determination of amount of
the unadjusted basis of each asset at the to these regulations. For the railroad track maintenance credit for the
time the QRTME is paid or incurred applicability of the Regulatory taxable year.
during that taxable year. Flexibility Act (5 U.S.C. chapter 6), (1) General amount.
The temporary regulations also please refer to the Special Analyses (2) Limitation on the credit.
address the issue of how section 45G section of the preamble to the cross- (i) Eligible taxpayer is a Class II
coordinates with section 61. Except as reference notice of proposed rulemaking railroad or Class III railroad.
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specifically provided in the Code, published in the Proposed Rules section (ii) Eligible taxpayer is not a Class II
section 61 and § 1.61–1(a) provide that in this issue of the Federal Register. railroad or Class III railroad.
gross income means all income from Pursuant to section 7805(f), these (iii) Effect of double track.
whatever source derived. Section 1.61– temporary regulations have been (3) Determination of amount of
1(a) further provides that gross income submitted to the Chief Counsel for QRTME paid or incurred.

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Federal Register / Vol. 71, No. 174 / Friday, September 8, 2006 / Rules and Regulations 53013

(i) In general. during the taxable year is determined (iii) Property Account 5, Tunnels and
(ii) Effect of reimbursements. under this section. A taxpayer claiming subways.
(4) Examples. the RTMC must do so by filing Form (iv) Property Account 6, Bridges,
(d) Assignment of track miles. 8900, ‘‘Qualified Railroad Track trestles, and culverts.
(1) In general. Maintenance Credit,’’ with its timely (v) Property Account 7, Elevated
(2) Assignment eligibility. filed (including extensions) Federal structures.
(3) Effective date of assignment. income tax return for the taxable year (vi) Property Account 8, Ties.
(4) Assignment information statement. for which the RTMC is claimed. (vii) Property Account 9, Rails and
(i) In general. Paragraph (b) of this section provides other track material.
(ii) Assignor. definitions of terms. Paragraph (c) of (viii) Property Account 11, Ballast.
(iii) Assignee. this section provides rules for (ix) Property Account 13, Fences,
(iv) Special rule for 2005 returns. computing the RTMC, including rules snowsheds, and signs.
(5) Special rules. regarding limitations on the amount of (x) Property Account 27, Signals and
(i) Effect of subsequent dispositions of the credit. Paragraph (d) of this section interlockers.
eligible railroad track during the (xi) Property Account 39, Public
provides rules for assigning miles of
assignment year. improvements; construction.
railroad track. Paragraph (e) of this
(ii) Effect of multiple assignments of (5) Qualified railroad track
section contains special rules. Paragraph
eligible railroad track miles during the maintenance expenditures (QRTME) are
(f) of this section contains rules for
same taxable year. expenditures for maintaining, repairing,
computing the amount of the RTMC in
(6) Examples. and improving qualifying railroad
the case of a controlled group, and for
(e) Special rules. structure that is owned or leased as of
the allocation of the group credit among
(1) Adjustments to basis. January 1, 2005, by a Class II railroad or
members of the controlled group.
(i) In general. Class III railroad. These expenditures
(b) Definitions. For purposes of
(ii) Basis adjustment made to railroad may or may not be chargeable to a
section 45G and this section, the
track. capital account.
following definitions apply:
(iii) Examples. (1) Class II railroad and Class III (6) Rail facilities of a Class II railroad
(2) Coordination with section 61. railroad have the respective meanings or Class III railroad are railroad yards,
(f) Controlled groups. given to these terms by the Surface tracks, bridges, tunnels, wharves, docks,
(1) In general. Transportation Board (STB). stations, and other related assets that are
(2) Definitions. (2) Eligible railroad track is railroad used in the transport of freight by a
(i) Trade or business. track located within the United States railroad and that are owned or leased by
(ii) Group and controlled group. that is owned or leased by a Class II the Class II railroad or Class III railroad.
(iii) Group credit. railroad or Class III railroad at the close (7) Railroad-related property is
(iv) Consolidated group. of its taxable year. For purposes of property that is provided directly to,
(v) Credit year. section 45G and this section, a Class II and is unique to, a railroad and that, in
(3) Computation of the group credit. railroad or Class III railroad owns the hands of a Class II railroad or Class
(4) Allocation of the group credit. railroad track if the railroad track is III railroad, is described in—
(i) In general. (i) The STB property accounts 3,
subject to the allowance for depreciation
(ii) Stand-alone entity credit. Grading; 5, Tunnels and subways; and
under section 167 by the Class II
(5) Special rules for consolidated 22, Storage warehouses, in 49 CFR part
railroad or Class III railroad.
groups. (3) Eligible taxpayer is— 1201, subpart A; and
(i) In general. (i) A Class II railroad or Class III (ii) Asset classes 40.1 through 40.54 in
(ii) Special rule for allocation of group railroad during the taxable year; the guidance issued by the Internal
credit among consolidated group (ii) Any person that transports Revenue Service under section 168(i)(1)
members. property using the rail facilities of a (for further guidance, for example, see
(6) Tax accounting periods used. Class II railroad or Class III railroad Rev. Proc. 87–56 (1987–2 CB 674), and
(i) In general. during the taxable year, but only with § 601.601(d)(2)(ii)(b) of this chapter),
(ii) Special rule when timing of respect to the miles of eligible railroad except that any office building, any
QRTME is manipulated. track assigned to the person for that passenger train car, and any
(7) Membership during taxable year in taxable year by that Class II railroad or miscellaneous structure if such
more than one group. Class III railroad under paragraph (d) of structure is not provided directly to, and
(8) Intra-group transactions. this section; or is not unique to, a railroad are excluded
(i) In general. (iii) Any person that furnishes from the definition of railroad-related
(ii) Payment for QRTME. railroad-related property or railroad- property.
(g) Effective date. related services to a Class II railroad or (8) Railroad-related services are
(1) In general. Class III railroad during the taxable year, services that are provided directly to,
(2) Application of regulation project but only with respect to the miles of and are unique to, a railroad and that
REG–142270–05 to pre-effective date. eligible railroad track assigned to the relate to railroad shipping, loading and
(3) Special rules for 2005 returns. person for that taxable year by that Class unloading of railroad freight, or repairs
■ Par. 3. Section 1.45G–1T is added to II railroad or Class III railroad under of rail facilities or railroad-related
read as follows: paragraph (d) of this section. property. Examples of railroad-related
(4) Qualifying railroad structure is services are the transport of freight by
§ 1.45G–1T Railroad track maintenance property located within the United rail; the loading and unloading of freight
credit (temporary). States that is described in the following transported by rail; railroad bridge
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(a) In general. For purposes of section STB property accounts in 49 CFR part services; railroad track construction;
38, the railroad track maintenance credit 1201, subpart A: providing railroad track material or
(RTMC) for qualified railroad track (i) Property Account 3, Grading. equipment; locomotive leasing or rental;
maintenance expenditures (QRTME) (ii) Property Account 4, Other right- maintenance of railroad’s right-of-way
paid or incurred by an eligible taxpayer of-way expenditures. (including vegetation control);

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piggyback trailer ramping; rail (as determined under paragraph (c)(3) of price for track materials, and debt
deramping services; and freight train this section) by an eligible taxpayer forgiveness. Similarly, any amount that
cars repair services. Examples of during the taxable year. an eligible taxpayer (assignee) pays a
services that are not railroad-related (2) Limitation on the credit—(i) Class II railroad or Class III railroad
services are general business services, Eligible taxpayer is a Class II railroad or (assignor) in exchange for an assignment
such as, accounting and bookkeeping, Class III railroad. If an eligible taxpayer of one or more miles of eligible railroad
marketing, legal services; cleaning is a Class II railroad or Class III railroad, track under paragraph (d) of this
services; office building rental; banking the RTMC determined under paragraph section, is treated, for purposes of this
services (including financing of (c)(1) of this section for the Class II section, as QRTME paid or incurred by
railroad-related property); and railroad or Class III railroad for any the assignee, and not by the assignor, at
purchasing of, or services performed on, taxable year must not exceed $3,500 the time and to the extent the assignor
property not described in paragraph multiplied by the sum of— pays or incurs QRTME.
(b)(7) of this section. (A) The number of miles of eligible (4) Examples. The application of this
(9) Except as provided in paragraph railroad track owned or leased by the paragraph (c) is illustrated by the
(e)(1) of this section, railroad track is Class II railroad or Class III railroad, following examples. In all examples, the
property described in STB property reduced by the number of miles of taxpayers use an accrual method of
accounts 8 (ties), 9 (rails and other track eligible railroad track assigned under accounting and a calendar taxable year,
material), and 11 (ballast) in 49 CFR part paragraph (d) of this section by the Class and are not members of a controlled
1201, subpart A. II railroad or Class III railroad to another group:
(10) Form 8900. If Form 8900 is eligible taxpayer for that taxable year;
Example 1. Computation of RTMC; section
revised or renumbered, any reference in and 45G credit limitation is not exceeded. (i) G
this section to that form shall be treated (B) The number of miles of eligible is a Class II railroad that owns or has leased
as a reference to the revised or railroad track owned or leased by to it 1,000 miles of railroad track within the
renumbered form. another Class II railroad or Class III United States on December 31, 2006. H is a
(11) Examples. The application of this railroad that are assigned under manufacturer that in 2006, transports its
paragraph (b) is illustrated by the paragraph (d) of this section to the Class products by rail using the rail facilities of G.
following examples. In all examples, the II railroad or Class III railroad for the In 2006, for purposes of section 45G, G
taxable year. assigns 100 miles of eligible railroad track to
taxpayers use a calendar taxable year, H and does not make any other assignments
and are not members of a controlled (ii) Eligible taxpayer is not a Class II
railroad or Class III railroad. If an of railroad track miles. H did not receive any
group: other assignments of railroad track miles in
eligible taxpayer is not a Class II 2006. During 2006, G incurred QRTME in the
Example 1. A is a manufacturer that in railroad or Class III railroad, the RTMC
2006, transports its products by rail using the amount of $2.5 million and H incurred
railroad tracks owned by B, a Class II railroad
determined under paragraph (c)(1) of QRTME in the amount of $200,000.
that owns 500 miles of railroad track within this section for the eligible taxpayer for (ii) For 2006, G determines the tentative
the United States on December 31, 2006. B any taxable year must not exceed $3,500 amount of RTMC under paragraph (c)(1) of
properly assigns for purposes of section 45G multiplied by the number of miles of this section to be $1,250,000 (50% multiplied
100 miles of eligible railroad track to A in eligible railroad track assigned under by $2,500,000 QRTME incurred by G during
2006. A is an eligible taxpayer for 2006 with paragraph (d) of this section by a Class 2006). G further determines G’s credit
respect to the 100 miles of eligible railroad limitation under paragraph (c)(2)(i) of this
II railroad or Class III railroad to the section for 2006 to be $3,150,000 ($3,500
track. eligible taxpayer for the taxable year.
Example 2. C is a bank that loans money multiplied by 900 miles of eligible railroad
(iii) Effect of double track. For track (1,000 miles owned by, or leased to, G
to several Class III railroads. In 2006, C loans purposes of this paragraph (c)(2), double
money to D, a Class III railroad, who in turn on December 31, 2006, less 100 miles
uses the loan proceeds to purchase track
track is treated as multiple lines of assigned by G to H in 2006)). Because G’s
material. Because providing loans is not a railroad track, rather than as a single tentative amount of RTMC does not exceed
service that is unique to a railroad, C is not line of railroad track. Thus, one mile of G’s credit limitation amount for 2006, G may
single track is one mile, but one mile of claim a RTMC for 2006 in the amount of
providing railroad-related services and, thus,
$1,250,000.
C is not an eligible taxpayer, even if D assigns double track is two miles.
(iii) For 2006, H determines the tentative
miles of eligible railroad track to C for (3) Determination of amount of
amount of RTMC under paragraph (c)(1) of
purposes of section 45G. QRTME paid or incurred—(i) In general. this section to be $100,000 (50% multiplied
Example 3. E leases locomotives directly The term paid or incurred means, in the by $200,000 QRTME incurred by H during
to Class I, Class II, and Class III railroads. In case of a taxpayer using an accrual 2006). H further determines H’s credit
2006, E leases locomotives to F, a Class II
method of accounting, a liability limitation under paragraph (c)(2)(ii) of this
railroad that owns 200 miles of railroad track
incurred (within the meaning of section for 2006 to be $350,000 ($3,500
within the United States on December 31,
§ 1.446–1(c)(1)(ii)). A liability may not multiplied by 100 miles of eligible railroad
2006. F properly assigns for purposes of track assigned by G to H in 2006). Because
section 45G 200 miles of eligible railroad be taken into account under section 45G
H’s tentative amount of RTMC does not
track to E. Because locomotives are property and this section prior to the taxable year
exceed H’s credit limitation amount for 2006,
that is unique to a railroad, and E leases these during which the liability is incurred. H may claim a RTMC in the amount of
locomotives directly to F in 2006, E is an (ii) Effect of reimbursements. The $100,000.
eligible taxpayer for 2006 with respect to the amount of QRTME treated as paid or Example 2. Computation of RTMC; section
200 miles of eligible railroad track assigned incurred during the taxable year shall be 45G credit limitation is exceeded. (i) The
to E by F. reduced by any amount to which the facts are the same as in Example 1, except
(c) Determination of amount of taxpayer is entitled to be reimbursed, that G assigned for purposes of section 45G
railroad track maintenance credit for directly or indirectly, whether or not only 50 miles of railroad track to H in 2006
the taxable year—(1) General amount. such reimbursement takes place during and, during 2006, H incurred QRTME in the
amount of $400,000.
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Except as provided in paragraph (c)(2) the taxable year in which the QRTME is, (ii) For 2006, G determines the tentative
of this section, for purposes of section but for this sentence, paid or incurred amount of RTMC under paragraph (c)(1) of
38, the RTMC determined under section by the taxpayer. Examples of indirect this section to be $1,250,000 (50% multiplied
45G(a) for the taxable year is equal to 50 reimbursements include discounted by $2,500,000 QRTME incurred by G during
percent of the QRTME paid or incurred freight shipping rates, markup of the 2006). G further determines G’s credit

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limitation under paragraph (c)(2)(i) of this ($3,500 multiplied by 150 miles of eligible single track is one mile, but one mile of
section for 2006 to be $3,325,000 ($3,500 railroad track assigned by J in 2006). Because double track is two miles.
multiplied by 950 miles of eligible railroad K’s tentative amount of RTMC does not (2) Assignment eligibility. Only a
track (1,000 miles owned by, or leased to, G exceed K’s credit limitation amount for 2006, Class II railroad or Class III railroad may
on December 31, 2006, less 50 miles assigned K may claim a RTMC in the amount of
$400,000.
assign a mile of eligible railroad track.
by G to H in 2006)). Because G’s tentative
amount of RTMC does not exceed G’s credit Example 4. Reimbursement of QRTME. (i) If a Class II railroad or Class III railroad
limitation amount for 2006, G may claim a L is a Class III railroad that owns or has assigns a mile of eligible railroad track
RTMC in the amount of $1,250,000. leased to it 500 miles of railroad track within to an eligible taxpayer, the assignee is
(iii) For 2006, H determines the tentative the United States on December 31, 2006. M not permitted to reassign any mile of
amount of RTMC under paragraph (c)(1) of is a manufacturer that in 2006 transports its eligible railroad track to another eligible
this section to be $200,000 (50% multiplied products by rail using the rail facilities of L. taxpayer. The maximum number of
by $400,000 QRTME incurred by H during During 2006, L did not incur any QRTME. miles of eligible railroad track that may
2006). H further determines H’s credit Also, in 2006, L assigned for purposes of
section 45G 200 miles of eligible railroad be assigned by a Class II railroad or
limitation under paragraph (c)(2)(ii) of this
section for 2006 to be $175,000 ($3,500 track to M and agreed to reduce L’s freight Class III railroad for any taxable year is
multiplied by 50 miles of eligible railroad shipping rates to M by $250,000 in exchange its total miles of eligible railroad track
track assigned by G to H in 2006). Because for M upgrading these railroad track miles. less the miles of eligible railroad track
H’s tentative amount of RTMC exceeds H’s Consequently, during 2006, M incurred that the Class II railroad or Class III
credit limitation amount for 2006, H may QRTME of $500,000 to upgrade these 200 railroad retains for itself in determining
claim a RTMC in the amount of $175,000 (the miles of railroad track and L reduced L’s its RTMC for the taxable year.
credit limitation amount). There is no freight shipping rates for M by $250,000. (3) Effective date of assignment. If a
carryover of the amount of $25,000 (the (ii) For 2006, M is an eligible taxpayer
because, during 2006, M transported property Class II railroad or Class III railroad
tentative amount of $200,000 less the credit assigns a mile of eligible railroad track,
limitation amount of $175,000). using the rail facilities of L and received an
Example 3. Railroad track miles assigned assignment of eligible railroad track miles the assignment is treated as being made
for payment. (i) J is a Class II railroad that from L. Under paragraph (c)(3)(ii) of this by the Class II railroad or Class III
owns or has leased to it 1,000 miles of section, the amount of QRTME paid or railroad at the close of its taxable year
railroad track within the United States on incurred by M during 2006 is $250,000 in which the assignment was made.
December 31, 2006. K is a corporation that ($500,000 QRTME actually incurred by M, With respect to the assignee, the
less the reimbursement of $250,000 by L to
sells ties, ballast, and other track material to
M). For 2006, M determines the tentative
assignment of a mile of eligible railroad
Class I, Class II, and Class III railroads. track is taken into account for the
amount of RTMC under paragraph (c)(1) of
During 2006, K sold these items to J and J taxable year of the assignee that
this section to be $125,000 (50% multiplied
incurred QRTME in the amount of $1 includes the date the assignment is
by $250,000 QRTME incurred by M during
million. Also, on December 6, 2006, J
assigned for purposes of section 45G 150
2006). M further determines M’s credit treated as being made by the assignor
limitation amount under paragraph (c)(2)(ii) Class II railroad or Class III railroad
miles of eligible railroad track to K and K
of this section for 2006 to be $700,000 under this paragraph (d)(3).
paid J $800,000 for that assignment. K did
($3,500 multiplied by 200 miles of eligible (4) Assignment information
not pay or incur any QRTME during 2006.
railroad track assigned by L to M in 2006). statement—(i) In general. A taxpayer
(ii) For 2006, in accordance with paragraph
Because M’s tentative amount of RTMC does
(c)(3)(ii) of this section, J is treated as having not exceed M’s credit limitation amount for
must file Form 8900, ‘‘Qualified
incurred QRTME in the amount of $200,000 2006, M may claim a RTMC in the amount Railroad Track Maintenance Credit,’’
($1 million QRTME actually incurred by J of $125,000. with its timely filed (including
less the $800,000 paid by K to J for the extensions) Federal income tax return
assignment of the railroad track miles in (d) Assignment of track miles—(1) In
for the taxable year for which the
2006). For 2006, J determines the tentative general. An assignment of any mile of
amount of RTMC under paragraph (c)(1) of
taxpayer assigns any mile of eligible
eligible railroad track under this
this section to be $100,000 (50% multiplied railroad track, even if the taxpayer is not
paragraph (d) is a designation by a Class
by $200,000 QRTME treated as incurred by itself claiming the RTMC for that taxable
II railroad or Class III railroad that is
J during 2006). J further determines J’s credit year.
made solely for purposes of section 45G (ii) Assignor. Except as provided in
limitation amount under paragraph (c)(2)(i)
of this section for 2006 to be $2,975,000
and this section of a specific number of paragraph (d)(4)(iv) of this section, a
($3,500 multiplied by 850 miles of eligible miles of eligible railroad track as being Class II railroad or Class III railroad
railroad track (1,000 miles owned by, or assigned to another eligible taxpayer for (assignor) that assigns one or more miles
leased to, J on December 31, 2006, less 150 a taxable year. A designation must be in of eligible railroad track during a taxable
miles assigned by J to K in 2006)). Because writing and must include the name and year to one or more eligible taxpayers
J’s tentative amount of RTMC does not taxpayer identification number of the
exceed J’s credit limitation amount for 2006,
must attach to the assignor’s Form 8900
assignee, and the information required for that taxable year an information
J may claim a RTMC in the amount of under the rules of paragraph
$100,000. statement providing—
(d)(4)(iii)(B) of this section. A (A) The name and taxpayer
(iii) For 2006, K is an eligible taxpayer
because, during 2006, K provided railroad-
designation requires no transfer of legal identification number of each assignee;
related property to J and received an title or other indicia of ownership of the (B) The total number of miles of the
assignment of eligible railroad track miles eligible railroad track, and need not assignor’s eligible railroad track;
from J. Under paragraph (c)(3)(ii) of this specify the location of any assigned mile (C) The number of miles of eligible
section, K is treated as having incurred of eligible railroad track. Further, an railroad track assigned by the assignor
QRTME in the amount of $800,000 (the assigned mile of eligible railroad track to each assignee for the taxable year;
amount paid by K to J for the assignment of need not correspond to any specific and
the railroad track miles in 2006). For 2006, mile of eligible railroad track with (D) The total number of miles of
K determines the tentative amount of RTMC respect to which the eligible taxpayer
under paragraph (c)(1) of this section to be
eligible railroad track assigned by the
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$400,000 (50% multiplied by $800,000


actually pays or incurs the QRTME. For assignor to all assignees for the taxable
QRTME treated as incurred by K during purposes of this paragraph (d), double year.
2006). K further determines K’s credit track is treated as multiple lines of (iii) Assignee. Except as provided in
limitation amount under paragraph (c)(2)(ii) railroad track, rather than as a single paragraph (d)(4)(iv) of this section, an
of this section for 2006 to be $525,000 line of railroad track. Thus, one mile of eligible taxpayer (assignee) that has

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received an assignment of miles of of eligible railroad track than it owned multiplied by 300 miles of eligible railroad
eligible railroad track during its taxable or leased as of the close of the taxable track assigned by N to O on December 31,
year from a Class II railroad or Class III year in which the assignment is made 2006). Because O’s tentative amount of
RTMC does not exceed O’s credit limitation
railroad, and that claims the RTMC for by the Class II railroad or Class III amount for 2006, O may claim a RMTC for
that taxable year, must attach to the railroad, the assignment is valid for 2006 in the amount of $50,000.
assignee’s Form 8900 for that taxable purposes of section 45G and this section Example 2. Assignor and assignee have
year a statement— only with respect to the name of the different taxable years. (i) The facts are the
(A) Providing the total number of assignee and the number of miles listed same as in Example 1, except that O’s taxable
miles of eligible railroad track assigned by the assignor Class II railroad or Class year ends on March 31.
to the assignee for the assignee’s taxable III railroad on the statement required (ii) The assignment of the 300 miles of
year; and eligible railroad track made by N to O on
under paragraph (d)(4)(ii) of this section
(B) Attesting that the assignee has in November 7, 2006, is treated as made on
and only to the extent of the maximum December 31, 2006. As a result, the
writing, and has retained as part of the miles of eligible railroad track that may assignment is taken into account by O for O’s
assignee’s records for purposes of be assigned by the assignor Class II taxable year ending on March 31, 2007. Thus,
§ 1.6001–1(a), the following information railroad or Class III railroad as for the taxable year ending on March 31,
from each assignor: determined under paragraph (d)(2) of 2007, O determines the tentative amount of
(1) The name and taxpayer this section. If the total number of miles RMTC under paragraph (c)(1) of this section
identification number of each assignor; on this statement exceeds the maximum to be $75,000 (50% multiplied by $150,000
(2) The date of each assignment made QRTME incurred by O during its taxable year
miles of eligible railroad track that may ending March 31, 2007). Because O’s
by each assignor (as determined under be assigned by the assignor Class II tentative amount of RTMC does not exceed
paragraph (d)(3) of this section) to the railroad or Class III railroad (as O’s credit limitation amount for 2006, O may
assignee; and determined under paragraph (d)(2) of claim a RMTC for 2006 in the amount of
(3) The number of miles of eligible this section), the total number of miles $75,000.
railroad track assigned by each assignor on the statement shall be reduced by the Example 3. Assignment location differs
to the assignee for the assignee’s taxable excess amount of miles. This reduction from QRTME location. (i) P, a calendar-year
year. is allocated among each assignee listed
taxpayer, is a Class III railroad that owns or
(iv) Special rule for 2005 returns. If an has leased to it 200 miles of railroad track
on the statement in proportion to the within the United States on December 31,
eligible taxpayer’s Federal income tax
total number of miles listed on the 2006. P owns 50 miles of this railroad track
return for a taxable year beginning after
statement for that assignee. and leases 150 miles of this railroad track
December 31, 2004, and ending before (6) Examples. The application of this from Q, a Class I railroad. On February 8,
September 7, 2006, is filed before paragraph (d) is illustrated by the 2006, P assigns for purposes of section 45G
October 10, 2006, and the eligible following examples. In none of the 50 miles of eligible railroad track to R. R is
taxpayer wants to apply paragraph (g)(2) examples are the taxpayers members of not a railroad, but is a taxpayer that ships
of this section but did not include with a controlled group: products using the 50 miles of eligible
that return the information specified in railroad track owned by P, and R paid
paragraph (d)(4)(ii) or (iii) of this Example 1. Assignor and assignee have the $100,000 in 2006 to P to enable P to upgrade
same taxable year. (i) N, a calendar year these 50 miles of eligible railroad track. In
section, as applicable, the eligible
taxpayer, is a Class II railroad that owns 500 March 2006, P also assigns for purposes of
taxpayer must attach a statement miles of railroad track within the United section 45G 150 miles of eligible railroad
containing the information specified in States on December 31, 2006. O, a calendar track to S. S is not a railroad, but is a
paragraph (d)(4)(ii) or (iii) of this year taxpayer, is not a railroad, but is a taxpayer that provides railroad-related
section, as applicable, to either— taxpayer that provides railroad-related property to P, and S paid $400,000 to P to
(A) The eligible taxpayer’s next filed property to N during 2006. On November 7, enable P to upgrade P’s 200 miles of eligible
original Federal income tax return; or 2006, N assigns for purposes of section 45G railroad track. For 2006, P pays or incurs
(B) The eligible taxpayer’s amended 300 miles of eligible railroad track to O. O QRTME in the amount of $500,000 to
Federal income tax return that is filed receives no other assignment of eligible upgrade the 150 miles of eligible railroad
pursuant to paragraph (g)(2) of this railroad track in 2006. O pays or incurs track that it leases from Q and pays or incurs
QRTME in the amount of $100,000 in no QRTME on the 50 miles of eligible
section, provided that amended Federal November 2006, and $50,000 in February railroad track that it owns. For 2006, P
income tax return is filed by the eligible 2007. N and O each file Form 8900 with their receives no other assignment of eligible
taxpayer before its next filed original timely filed Federal income tax returns for railroad track miles and did not retain any
Federal income tax return. 2006 and attach the statement required by eligible railroad track miles for itself. Also, R
(5) Special rules—(i) Effect of paragraph (d)(4)(ii) and (iii), respectively, of and S do not pay or incur any other amounts
subsequent dispositions of eligible this section reporting the assignment of the that would qualify as QRTME during 2006.
railroad track during the assignment 300 miles of eligible railroad track to O. P, R, and S each file Form 8900 with their
year. If a Class II railroad or Class III (ii) The assignment of the 300 miles of timely filed Federal income tax returns for
railroad assigns one or more miles of eligible railroad track made by N to O on 2006 and attach the statement required by
November 7, 2006, is treated as made on paragraph (d)(4)(ii) or (iii) of this section,
eligible railroad track that it owned or December 31, 2006 (at the close of the N’s whichever applies, reporting the assignment
leased as of the actual date of the taxable year). Consequently, the assignment of eligible railroad track by P to R or S in
assignment, but does not own or lease is taken into account by O for O’s taxable 2006.
any eligible railroad track at the close of year ending on December 31, 2006. For 2006, (ii) For 2006, in accordance with paragraph
the taxable year in which the O is an eligible taxpayer because, during (c)(3)(ii) of this section, P is treated as having
assignment is made by the Class II 2006, O provides railroad-related property to incurred QRTME in the amount of $0
railroad or Class III railroad, the N and receives an assignment of 300 eligible ($500,000 QRTME actually incurred by P less
assignment is not valid for that taxable railroad track miles from N. For 2006, O the $100,000 paid by R to P for the
determines the tentative amount of RTMC assignment of the 50 miles of eligible railroad
year for purposes of section 45G and under paragraph (c)(1) of this section to be track and the $400,000 paid by S to P for the
rwilkins on PROD1PC63 with RULES

this section. $50,000 (50% multiplied by $100,000 assignment of the 150 miles of eligible
(ii) Effect of multiple assignments of QRTME paid or incurred by O during 2006). railroad track). Further, P assigned all of its
eligible railroad track miles during the O further determines the credit limitation eligible railroad track miles to R and S for
same taxable year. If a Class II railroad amount under paragraph (c)(2)(i) of this 2006. Accordingly, for 2006, P may not claim
or Class III railroad assigns more miles section for 2006 to be $1,050,000 ($3,500 any RTMC.

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(iii) For 2006, R is an eligible taxpayer Form 8900 with their timely filed Federal amount of RTMC under paragraph (c)(1) of
because, during 2006, R ships property using income tax returns for 2006, and attach the this section to be $125,000 (50% multiplied
the rail facilities of P and receives an statement required by paragraph (d)(4)(ii) and by $250,000 QRTME incurred by V during
assignment of 50 eligible railroad track miles (iii), respectively, of this section, reporting 2006). V further determines the credit
from P. In accordance with paragraph the assignment of 200 miles of eligible limitation amount under paragraph (c)(2)(ii)
(c)(3)(ii) of this section, R is treated as having railroad track to W. of this section to be $350,000 ($3,500
incurred QRTME in the amount of $100,000 (ii) Because T did not retain any miles of multiplied by the 100 miles of eligible
(the amount paid by R to P for the assignment eligible railroad track for itself for 2006, the railroad track assigned by T to V in 2006).
of the eligible railroad track miles in 2006) maximum miles of eligible railroad track that Because V’s tentative amount of RTMC does
even though no work was performed on the may be assigned by T for 2006 is 200 miles not exceed W’s credit limitation amount for
50 miles of eligible railroad track that was pursuant to paragraph (d)(2) of this section. 2006, V may claim a RTMC for 2006 in the
assigned by P to R. For 2006, R determines On the statement required by paragraph amount of $125,000.
the tentative amount of RTMC under (d)(4)(ii) of this section, T assigned a total of (iv) For 2006, W is an eligible taxpayer
paragraph (c)(1) of this section to be $50,000 200 miles of eligible railroad track to W. because, during 2006, W provides railroad-
(50% multiplied by $100,000 QRTME treated Consequently, because T did not list V as an related services to T and receives an
as incurred by R during 2006). R further assignee on T’s statement required by assignment of 100 eligible railroad track
determines the credit limitation amount paragraph (d)(4)(ii) of this section, V did not miles from T. W determines the tentative
under paragraph (c)(2)(ii) of this section to be receive an assignment of eligible railroad amount of RTMC under paragraph (c)(1) of
$175,000 ($3,500 multiplied by 50 miles of track miles from T during 2006 and V is not this section to be $550,000 (50% multiplied
eligible railroad track assigned by P to R in an eligible taxpayer for 2006. Thus, for 2006, by $1,100,000 QRTME incurred by W during
2006). Because R’s tentative amount of RTMC V may not claim any RTMC even though V 2006). W further determines the credit
does not exceed R’s credit limitation amount incurred QRTME in the amount of $250,000. limitation amount under paragraph (c)(2)(ii)
for 2006, R may claim a RTMC for 2006 in (iii) For 2006, W is an eligible taxpayer of this section to be $350,000 ($3,500
the amount of $50,000. because, during 2006, W provides railroad- multiplied by the 100 miles of eligible
(iv) For 2006, S is an eligible taxpayer related services to T and receives an railroad track assigned by T to W in 2006).
because, during 2006, S provides railroad- assignment of 200 eligible railroad track Because W’s tentative amount of RTMC
related property to P and receives an miles from T. W determines the tentative exceeds W’s credit limitation amount for
assignment of 150 eligible railroad track amount of RTMC under paragraph (c)(1) of 2006, W may claim a RTMC for 2006 in the
miles from P. In accordance with paragraph this section to be $550,000 (50% multiplied amount of $350,000 (the credit limitation).
(c)(3)(ii) of this section, S is treated as having by $1,100,000 QRTME incurred by W during There is no carryover of the amount of
incurred QRTME in the amount of $400,000 2006). W further determines the credit $200,000 (the tentative amount of $550,000
less the credit limitation amount of
(amount paid by S to P for the assignment of limitation amount under paragraph (c)(2)(ii)
$350,000).
the eligible railroad track miles in 2006). For of this section to be $700,000 ($3,500
2006, S determines the tentative amount of multiplied by the 200 miles of eligible (e) Special rules—(1) Adjustments to
RTMC under paragraph (c)(1) of this section railroad track assigned by T to W in 2006). basis—(i) In general. All or some of the
to be $200,000 (50% multiplied by $400,000 Because W’s tentative amount of RTMC does QRTME paid or incurred by an eligible
QRTME treated as incurred by S during not exceed W’s credit limitation amount for taxpayer during the taxable year may be
2006). S further determines the credit 2006, W may claim a RTMC for 2006 in the required to be capitalized under section
limitation amount under paragraph (c)(2)(ii) amount of $550,000.
263(a) as a tangible asset or as an
of this section to be $525,000 ($3,500 Example 5. Multiple assignments of track
multiplied by 150 miles of eligible railroad miles. (i) Same facts as in Example 4, except intangible asset. See, for example,
track assigned by P to S in 2006). Because S’s T, to its Form 8900 for 2006, attaches the § 1.263(a)–4(d)(8), which requires
tentative amount of RTMC does not exceed statement required by paragraph (d)(4)(ii) of capitalization of amounts paid or
S’s credit limitation amount for 2006, S may this section assigning 200 miles of eligible incurred by a taxpayer to produce or
claim a RTMC for 2006 in the amount of railroad track to W and 200 miles of eligible improve real property owned by another
$200,000. railroad track to V. (except to the extent the taxpayer is
Example 4. Multiple assignments of track (ii) Because T did not retain any miles of selling services at fair market value to
miles. (i) T, a calendar-year taxpayer, is a eligible railroad track for itself for 2006, the produce or improve the real property) if
Class III railroad that owns or has leased to maximum miles of eligible railroad track that the real property can reasonably be
it 200 miles of railroad track within the may be assigned by T for 2006 is 200 miles
United States on December 31, 2006. T owns pursuant to paragraph (d)(2) of this section.
expected to produce significant
75 miles of this railroad track and leases 125 However, on the statement required by economic benefits for the taxpayer. The
miles of this railroad track from U, a Class paragraph (d)(4)(ii) of this section, T assigned basis of the tangible asset or intangible
I railroad. V and W are not railroads, but are a total of 400 miles of eligible railroad track asset includes the capitalized amount of
both taxpayers that provide railroad-related (200 miles to W and 200 miles to V). the QRTME.
services to T during 2006. On January 15, Consequently, the 400 miles of eligible (ii) Basis adjustment made to railroad
2006, T assigns for purposes of section 45G railroad track on this statement must be track. An eligible taxpayer must reduce
200 miles of eligible railroad track to V. V reduced to the 200 maximum miles of the adjusted basis of any railroad track
agrees to incur, in 2006, $1.4 million of eligible railroad track available for with respect to which the eligible
QRTME to upgrade a portion of/segment of assignment for 2006. Because the statement taxpayer claims the RTMC. For
these 200 miles of eligible railroad track. Due reports 200 miles of eligible railroad track
to unexpected financial difficulties, V only assigned to each W and V, the reduction of
purposes of section 45G(e)(3) and this
incurs $250,000 of QRTME during 2006 and 200 miles (400 total miles of eligible railroad paragraph (e)(1), the adjusted basis of
on May 15, 2006, T learns that V is unable track on the statement less 200 maximum any railroad track with respect to which
to incur the remainder of the QRTME. On miles of eligible railroad track available for the eligible taxpayer claims the RTMC is
June 15, 2006, T assigns for purposes of assignment) is allocated pro-rata between W limited to the amount of QRTME, if any,
section 45G the 200 miles of railroad track to and V and, therefore, 100 miles each to W that is required to be capitalized into the
W. In 2006, W incurs $1,100,000 of QRTME and V. Thus, pursuant to paragraph (d)(5)(ii) qualifying railroad structure or an
to upgrade a portion of/segment of the of this section, the number of miles of intangible asset. The adjusted basis of
railroad track. For 2006, T receives no other eligible railroad track assigned by T to W and the railroad track is reduced by the
assignment of eligible railroad track miles V for 2006 is 100 miles each.
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and did not retain any eligible railroad track (iii) For 2006, V is an eligible taxpayer
amount of the RTMC allowable (as
miles for itself. V and W do not receive any because, during 2006, V provides railroad- determined under paragraph (c) of this
other assignments of miles of eligible railroad related services to T and receives an section) by the eligible taxpayer for the
track miles from a Class II railroad or Class assignment of 100 eligible railroad track taxable year, but not below zero. This
III railroad during 2006. T and W each file miles from T. V determines the tentative reduction is taken into account at the

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53018 Federal Register / Vol. 71, No. 174 / Friday, September 8, 2006 / Rules and Regulations

time the QRTME is paid or incurred by 2006, Y assigns for purposes of section 45G section. To determine the amount of
an eligible taxpayer and before the 300 miles of eligible railroad track to Z. Z RTMC (if any) allowable to a trade or
depreciation deduction with respect to does not receive any other assignments of business that at the end of its taxable
such railroad track is determined for the eligible railroad track miles in 2006. During year is a member of a controlled group,
2006, Z incurs QRTME in the amount of $1
taxable year for which the RTMC is million, and Y does not incur any QRTME.
a taxpayer must—
allowable. If all or some of the QRTME Y and Z each file Form 8900 with their (i) Compute the group credit in the
paid or incurred by an eligible taxpayer timely filed Federal income tax returns for manner described in paragraph (f)(3) of
during the taxable year is capitalized 2006 and attach the statement required by this section; and
under section 263(a) to more than one paragraph (d)(4)(ii) and (iii), respectively, of
(ii) Allocate the group credit among
asset, whether tangible or intangible (for this section reporting the assignment of the
300 miles of eligible railroad track to Z.
the members of the group in the manner
example, railroad track and bridges), the described in paragraph (f)(4) of this
reduction to the basis of these assets (ii) For 2006, Z determines the tentative
amount of RTMC under paragraph (c)(1) of section.
under this paragraph (e)(1)(ii) is
this section to be $500,000 (50% multiplied (2) Definitions. For purposes of
allocated among each of the assets
by $1 million QRTME incurred by Z during section 45G(e)(2) and paragraph (f) of
subject to the reduction in proportion to 2006). Z further determines the credit
the unadjusted basis of each asset at the this section—
limitation amount under paragraph (c)(2)(ii)
time the QRTME is paid or incurred of this section for 2006 to be $1,050,000 (i) A trade or business is a sole
during that taxable year. ($3,500 multiplied by 300 miles of eligible proprietorship, a partnership, a trust, an
(iii) Examples. The application of this railroad track assigned by Y to Z in 2006). estate, or a corporation that is carrying
paragraph (e)(1) is illustrated by the Because Z’s tentative amount of RTMC does on a trade or business (within the
following examples. In each example, not exceed Z’s credit limitation amount for meaning of section 162). Any
all taxpayers use a calendar taxable 2006, Z may claim a RTMC for 2006 in the corporation that is a member of a
year, and no taxpayers are members of amount of $500,000. commonly controlled group shall be
a controlled group. (iii) For 2006, Z also must determine the deemed to be carrying on a trade or
portion of the $1 million QRTME that Z business if any other member of that
Example 1. (i) X is a Class II railroad that incurs that is required to be capitalized under
owns 500 miles of railroad track within the group is carrying on any trade or
section 263(a), and the portion that is a
United States on December 31, 2006. During section 162 expense. Because Z is not a Class business;
2006, X incurs $1 million of QRTME for II railroad or Class III railroad, Z cannot use (ii) Group and controlled group means
maintaining this railroad track. X uses the the track maintenance allowance method. a controlled group of corporations, as
track maintenance allowance method for Assume that all of the QRTME constitutes an defined in section 41(f)(5), or a group of
track structure expenditures (for further intangible asset under § 1.263(a)–4(d)(8) and, trades or businesses under common
guidance, see Rev. Proc. 2002–65 (2002–2 CB therefore, is required to be capitalized by Z
700) and § 601.601(d)(2)(ii)(b) of this
control. For rules for determining
under section 263(a) as an intangible asset. In whether trades or businesses are under
chapter). Assume all of the $1 million accordance with paragraph (e)(1)(ii) of this
QRTME is track structure expenditures and common control, see § 1.52–1 (b)
section, Z reduces the capitalized amount of
none of it was expended for new track $1 million by the RTMC of $500,000 claimed through (g);
structure. by Z for 2006. Thus, the capitalized amount (iii) Group credit means the RTMC (if
(ii) For 2006, X determines the tentative of $1 million for the intangible asset is any) allowable to a controlled group;
amount of RTMC under paragraph (c)(1) of reduced to $500,000. Further, pursuant to
this section to be $500,000 (50% multiplied (iv) Consolidated group has the
§ 1.167(a)–3(b)(1)(iv), Z may treat this meaning set forth in § 1.1502–1(h); and
by $1 million QRTME incurred by X during intangible asset with an adjusted basis of
2006). X further determines the credit $500,000 as having a useful life of 25 years (v) Credit year means the taxable year
limitation amount under paragraph (c)(2)(i) for purposes of the depreciation allowance for which the member is computing the
of this section for 2006 to be $1,750,000 under section 167(a). RTMC.
($3,500 multiplied by 500 miles of eligible
railroad track). Because X’s tentative amount (2) Coordination with section 61. (3) Computation of the group credit.
of RTMC does not exceed X’s credit Except as specifically provided in the All members of a controlled group are
limitation amount for 2006, X may claim a Code and regulations under the Code, treated as a single taxpayer for purposes
RTMC for 2006 in the amount of $500,000. the owner of qualifying railroad of computing the RTMC. The group
(iii) Of the $1 million QRTME incurred by structure has gross income if another credit is computed by applying all of the
X during 2006, X determines under the track person paid or incurred QRTME for the section 45G computational rules
maintenance allowance method that (including the rules set forth in this
$750,000 is the track maintenance allowance
owner’s qualifying railroad structure
and that person does not have a section) on an aggregate basis.
under section 162 and $250,000 is the
capitalized amount for the track structure. In depreciable interest in the tangible (4) Allocation of the group credit—(i)
accordance with paragraph (e)(1)(ii) of this improvements made by the QRTME. In general. (A) To the extent the group
section, X reduces the capitalized amount of See, for example, section 109, which credit (if any) computed under
$250,000 by the RTMC of $500,000 claimed excludes from gross income of the paragraph (f)(3) of this section does not
by X for 2006, but not below zero. Thus, the lessor, the value of property attributable exceed the sum of the stand-alone entity
capitalized amount of $250,000 is reduced to to buildings or other improvements credits of all of the members of a
zero. X also deducts under section 162 a made by a lessee. controlled group, computed under
track maintenance allowance of $750,000 on (f) Controlled groups—(1) In general. paragraph (f)(4)(ii) of this section, such
its 2006 Federal income tax return.
Pursuant to section 45G(e)(2), if an group credit shall be allocated among
Example 2. (i) Y is a Class II railroad that
owns or has leased to it 500 miles of eligible eligible taxpayer is a member of a the members of the controlled group in
railroad track within the United States on controlled group of corporations, rules proportion to the stand-alone entity
rwilkins on PROD1PC63 with RULES

December 31, 2006. Z is not a railroad, but similar to the rules in § 1.41–6T apply credits of the members of the controlled
is a taxpayer that, in 2006, transports its for determining the amount of the group, computed under paragraph
products using the rail facilities of Y. In RTMC under section 45G(a) and this (f)(4)(ii) of this section:

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Federal Register / Vol. 71, No. 174 / Friday, September 8, 2006 / Rules and Regulations 53019

group credit that does not exceed sum of × member’s stand-alone entity credit
all the members ’ stand-along entity credits Sum of all the members’ stand-
alone entity credits.

(B) To the extent that the group credit members of the controlled group, controlled group in proportion to the
(if any) computed under paragraph (f)(3) computed under paragraph (f)(4)(ii) of QRTMEs of the members of the
of this section exceeds the sum of the this section, such excess shall be controlled group:
stand-alone entity credits of all of the allocated among the members of a

QRTMEs of members that are


(group credit less the sum of all the × eligible taxppayers
members’ stand-alone entity credits) sum of QRTMEs of all members that
are eligible taxpaayers.

(ii) Stand-alone entity credit. The 31, S’s fiscal year ending June 30, which must designate its group membership
term stand-alone entity credit means the ends within Q’s and R’s taxable year, is for that year either—
RTMC (if any) that would be allowable treated as S’s credit year. (i) In its next filed original Federal
to a member of a controlled group if the (ii) Special rule when timing of income tax return; or
credit were computed as if section QRTME is manipulated. If the timing of (ii) In its amended Federal income tax
45G(e)(2) did not apply, except that the QRTME by members using different tax return that is filed pursuant to
member must apply the rules provided accounting periods is manipulated to paragraph (g)(2) of this section,
in paragraphs (f)(5) (relating to generate a credit in excess of the amount provided that amended Federal income
consolidated groups) and (f)(8) (relating that would be allowable if all members tax return is filed by the business before
to intra-group transactions) of this of the group used the same tax its next filed original Federal income tax
section. accounting period, then the appropriate return.
(5) Special rules for consolidated Internal Revenue Service official in the (8) Intra-group transactions—(i) In
groups—(i) In general. For purposes of operating division that has examination general. Because all members of a group
applying paragraph (f)(4) of this section, jurisdiction of the return may require under common control are treated as a
a consolidated group whose members each member of the group to calculate single taxpayer for purposes of
are members of a controlled group is the credit in the current taxable year determining the RTMC, transfers
treated as a single member of the and all future years as if all members of between members of the group are
controlled group and a single stand- the group had the same taxable year and generally disregarded.
alone entity credit is computed for the base period as the computing member. (ii) Payment for QRTME. Amounts
consolidated group. paid or incurred by the owner (or lessor)
(7) Membership during taxable year in
of eligible railroad track to another
(ii) Special rule for allocation of group more than one group. A trade or
member of the group for QRTME shall
credit among consolidated group business may be a member of only one
be taken into account as QRTME by the
members. The portion of the group group for a taxable year. If, without
owner (or lessor) of the eligible railroad
credit that is allocated to a consolidated application of this paragraph (f)(7), a
track for purposes of section 45G only
group is allocated to the members of the business would be a member of more
to the extent of the lesser of—
consolidated group in accordance with than one group at the end of its taxable (A) The amount paid or incurred to
the principles of paragraph (f)(4) of this year, the business shall be treated as a the other member; or
section. However, for this purpose, the member of the group in which it was (B) The amount that would have been
stand-alone entity credit of a member of included for its preceding taxable year. considered paid or incurred by the other
a consolidated group is computed If the business was not included for its member for the QRTME, if the QRTME
without regard to section 45G(e)(2). preceding taxable year in any group in was not reimbursed by the owner (or
(6) Tax accounting periods used—(i) which it could be included as of the end lessor) of the eligible railroad track.
In general. The credit allowable to a of its taxable year, the business shall (g) Effective date—(1) In general. (i)
member of a controlled group is that designate in its timely filed (including Except as provided in paragraphs (g)(2)
member’s share of the group credit extensions) federal income tax return for and (g)(3) of this section, this section
computed as of the end of that member’s the taxable year the group in which it applies to taxable years ending on or
taxable year. In computing the group is being included. If the business does after September 7, 2006, and beginning
credit for a group whose members have not so designate, then the appropriate before January 1, 2008.
different taxable years, a member Internal Revenue Service official in the (ii) The applicability of this section
generally should treat the taxable year of operating division that has examination expires on September 7, 2009.
another member that ends with or jurisdiction of the return will determine (2) Application of regulation project
within the credit year of the computing the group in which the business is to be REG–142270–05 to pre-effective date. A
member as the credit year of that other included. If the Federal income tax taxpayer may apply this section to
member. For example, Q, R, and S are return for a taxable year beginning after taxable years beginning after December
ER08SE06.001</MATH>

members of a controlled group of December 31, 2004, and ending before 31, 2004, and ending before September
rwilkins on PROD1PC63 with RULES

corporations. Both Q and R are calendar September 7, 2006, is filed before 7, 2006, provided that the taxpayer
year taxpayers. S files a return using a October 10, 2006, and the business applies all provisions in this section to
fiscal year ending June 30. For purposes wants to apply paragraph (g)(2) of this the taxable year.
of computing the group credit at the end section but did not designate its group (3) Special rules for 2005 returns. If a
ER08SE06.000</MATH>

of Q’s and R’s taxable year on December membership in that return, the business taxpayer’s Federal income tax return for

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53020 Federal Register / Vol. 71, No. 174 / Friday, September 8, 2006 / Rules and Regulations

a taxable year beginning after December the National Park Service (NPS) general (North Core Banks, Middle Core Banks,
31, 2004, and ending before September regulations authorizing park areas to South Core Banks, and Shackleford
7, 2006 is filed before October 10, 2006, allow the use of PWC by promulgating Banks), which consist mostly of wide,
and the taxpayer is not filing an a special regulation. Individual parks bare beaches with low dunes covered by
amended Federal income tax return for must determine whether PWC use is scattered grasses, flat grasslands
that taxable year pursuant to paragraph appropriate for a specific park area bordered by dense vegetation, and large
(g)(2) of this section before the based on an evaluation of that area’s expanses of salt marsh alongside the
taxpayer’s next filed original Federal enabling legislation, resources and sound. Congressionally established
income tax return, see paragraphs values, other visitor uses, and overall boundaries include 150′ of water from
(d)(3)(iv) and (f)(7) of this section for the management objectives. the mean low waterline on the sound
statements that must be attached to the DATES: Effective Date: This rule is side of all islands. There are no road
taxpayer’s next filed original Federal effective September 8, 2006. connections to the mainland or between
income tax return. ADDRESSES: Mail inquiries to the islands.
Superintendent, Cape Lookout National Coastal barrier islands, such as those
PART 602—OMB CONTROL NUMBERS located in Cape Lookout National
UNDER THE PAPERWORK Seashore, 131 Charles Street, Harkers
Island, NC 28531. Seashore, are unique land forms that
REDUCTION ACT provide protection for diverse aquatic
FOR FURTHER INFORMATION CONTACT: Jerry
■ Par. 4. The authority citation for part
habitats and serve as the mainland’s
Case, Regulations Program Manager,
602 continues to read as follows: first line of defense against the impacts
National Park Service, 1849 C Street,
of severe coastal storms and erosion.
Authority: 26 U.S.C. 7805. NW., Room 7241, Washington, DC
Located at the interface of land and sea,
20240. Phone: (202) 208–4206. E-mail:
■ Par. 5. In § 602.101, paragraph (b) is the dominant physical factors
jerry_case@nps.gov.
amended by adding the following entry responsible for shaping coastal
SUPPLEMENTARY INFORMATION: landforms are tidal range, wave energy,
in numerical order to the table to read
as follows: Background and sediment supply from rivers and
older, pre-existing coastal sand bodies.
§ 602.101 OMB control numbers. Personal Watercraft Regulation Relative changes in local sea level also
* * * * * On March 21, 2000, the NPS profoundly affect coastal barrier island
(b) * * * published a regulation (36 CFR 3.24) on diversity. Coastal barrier islands exhibit
the management of PWC use within all the following six characteristics:
Current units of the national park system (65 FR • Subject to the impacts of coastal
CFR part or section where identi- OMB storms and sea level rise.
fied and described control 15077). The regulation prohibits PWC
No. use in all national park units unless the • Buffer the mainland from the
NPS determines that this type of water- impact of storms.
based recreational activity is • Protect and maintain productive
* * * * * appropriate for the specific park unit estuarine systems which support the
1.45G–1T ...................................... 1545– based on the legislation establishing that nation’s fishing and shellfishing
park, the park’s resources and values, industries.
* * * * * • Consist primarily of unconsolidated
other visitor uses of the area, and overall
management objectives. The regulation sediments.
Mark E. Matthews, banned PWC use in all park units • Subject to wind, wave, and tidal
Deputy Commissioner for Services and effective April 20, 2000, except for 21 energies.
Enforcement. parks, lakeshores, seashores, and • Include associated landward
Eric Solomon, recreation areas. The regulation aquatic habitats which the non-wetland
Acting Deputy Assistant Secretary of the established a 2-year grace period portion of the coastal barrier island
Treasury (Tax Policy). following the final rule publication to protects from direct wave attack.
[FR Doc. E6–14858 Filed 9–7–06; 8:45 am] provide these 21 park units time to Coastal barrier islands protect the
BILLING CODE 4830–01–P consider whether PWC use should be aquatic habitats between the barrier
permitted to continue. island and the mainland. Together with
their adjacent wetland, marsh,
Description of Cape Lookout National estuarine, inlet, and nearshore water
DEPARTMENT OF THE INTERIOR Seashore habitats, coastal barriers support a
National Park Service Cape Lookout National Seashore was tremendous variety of organisms.
established by Congress in 1966 to Millions of fish, shellfish, birds,
36 CFR Part 7 conserve and preserve for public use mammals, and other wildlife depend on
and enjoyment the outstanding natural, barriers and their associated wetlands
RIN 1024–AD44 cultural, and recreational values of a for vital feeding, spawning, nesting,
dynamic coastal barrier island nursery, and resting habitat.
Cape Lookout National Seashore,
Personal Watercraft Use environment for future generations. Shackleford Banks contains the park’s
Cape Lookout National Seashore is a most extensive maritime forest as well
AGENCY: National Park Service, Interior. low, narrow, ribbon of sand located as wild horses that have adapted to this
ACTION: Final rule. three miles off the mainland coast in the environment over the centuries. The
central coastal area of North Carolina islands are an excellent place to see
rwilkins on PROD1PC63 with RULES

SUMMARY: This final rule designates and occupies more than 29,000 acres of birds, particularly during spring and fall
areas where personal watercraft (PWC) land and water from Ocracoke Inlet on migrations. A number of tern species,
may be used to access Cape Lookout the northeast to Beaufort Inlet to the egrets, herons, and shorebirds nest here.
National Seashore, North Carolina. This southwest. The national seashore Loggerhead turtles climb the beaches at
final rule implements the provisions of consists of four main barrier islands nesting time.

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