^UTTEBxt ^ "'»•"A I l i ^ ^

1934 VOLUME 21 NUMBER 130 * ^ a/j t e d ^

Washington, Friday, July 6, 1956

TITLE 3— THE PRESIDENT Proclamation No. 2450 of December 19, CONTENTS 1940, and do hereby further modify the PROCLAMATION 3145 said Proclamation No. 2351 of September THE PRESIDENT 5, 1939, so that (1) the quota year for Modification of R estrictions on cotton having a staple length of lYa Proclamations Paee Imports of Long-S taple Cotton inches or more shall hereafter commence Modification of restrictions on BY THE PRESIDENT OF THE UNITED STATES on August 1, and (2) the quantity of such imports of long-staple cotton- 4995 OF AMERICA cotton which may be entered or with­ Modifying Proclamation - No. drawn from warehouse for consumption 3140 carrying out the Sixth A PROCLAMATION during the period May 28, 1956, to July Protocol of supplementary WHEREAS, pursuant to section 22 of 31, 1956, inclusive, together with the concessions to the General the Agricultural Adjustment Act, as quantity of cotton having a staple length Agreement on Tariffs and amended (7 U. S. C. 624), the President of 1 Va inches or more but less than l l1At Trade______- 4995 issued a proclamation on September 5, inches which was entered or withdrawn 1939 (No. 2351; 54 Stat. 2640), limiting from warehouse for consumption during EXECUTIVE AGENCIES imports of cotton having a staple length the period February 1, 1956, to May 27, Agricultural Conservation Pro­ of lYo inches or more to an annual quota 1956, inclusive, shall not exceed 22,- of 45,656,420 pounds, which proclamation 828,210 pounds. gram Service was amended by Proclamation No. 2450 IN WITNESS WHEREOF, I have here­ Rules and regulations: of December 19, 1940 (54 Stat. 2769), unto set my hand and caused the Seal Vegetative cover for green ma­ suspending the quota on cotton having of the United States of America to be nure and protection from a staple length of l xiA& inches or more, affixed. erosion: and by Proclamation No. 2856 of Sep­ DONE at the City of Washington this 1955 ____ L-______4998 tember 3, 1949 (14 P. R. 5517), changing twenty-ninth day of June in the year 1956 ______4999 the opening date from September 20 to of our Lord nineteen hundred Agricultural Marketing Service February 1 for the annual quota for cot­ [seal] and fifty-six, and of the Inde­ Rules and regulations: ton having a staple length of 1 Va inches pendence of the United States Pears, Bartlett, fresh; grown in or more but less than DVie inches; of America the one hundred and California; regulation by WHEREAS section 202 (a) of the Agri­ eightieth. grades and sizes------4998 cultural Act of 1956 (Public Law 540, D wight D. E isenhower Tobacco markets, designation of; 84th Congress), approved May 28, 1956, By the President: Swainsboro and Thomasville, provides as follows: Ga., and Madison, Fla —_ 4998 H erbert H oover, Jr., Sec. 202 (a). Hereafter the quota for cot­ Acting Secretary of State. Agriculture Department ton having a staple length of one and one- See Agricultural Conservation eighth inches or more, established September [P. R. Doc. 56-5410; Piled, July 5, 1956; Program Service; Agricultural 20, 1930, pursuant to section 22 of the Agri­ 11:07 a. m.] cultural Adjustment Act of 1933, as amended, Marketing Service ; Farmers shall apply to the same grades and staple Home Administration. lengths included in the quota when such Air Force Department quota was initially established. Such quota shall provide for cotton having a staple PROCLAMATION 3146 Rules and regulations: length of one and eleven sixteenths inches Enlisted Reserve; voluntary en­ and longer, and shall establish dates for the Modifying P roclamation No. 3140 try on extended active duty— 5014 quota year which will recognize and permit Carrying Out the Sixth P rotocol of Atomic Energy Commission entry to conform to normal marketing prac­ S upplementary Concessions to the Notices : tices and requirements for such cotton. G eneral Agreement on T ariffs and State College of Washington; WHEREAS I find and declare that the T rade application for utilization fa­ termination of the said Proclamation No. BY THE PRESIDENT OF THE UNITED STATES cility license------5019 2450 of December 19,1940, and the modi­ OF AMERICA fications hereinafter indicated of the Civil Aeronautics Board said Proclamation No. 2351 of September A PROCLAMATION Rules and regulations : 5, 1939, are necessary in order to carry WHEREAS by Proclamation No. 3140 Certification and operation rules out the provisions of the said section 202 of June 13, 1956 (21 F. R. 4237), the for scheduled air carriers; (a) of the Agricultural Act of 1956: President has proclaimed such modifica­ alternate airport landing tions of existing duties and other import minimums: NOW, THEREFORE, I, DWIGHT D. Interstate______4999 EISENHOWER, President of the United restrictions of the United States, or such continuance of existing customs or excise Outside continental limits of States of America, acting under and by United States------4999 virtue of the authority vested in me by treatment of articles imported into the section 202 (a) of the said Agricultural United States as were found to be re- Commerce Department Act of 1956. do hereby terminate the said (Continued on p. 4997) See Federal Maritime Board. 4995 4996 THE PRESIDENT

CONTENTS— Continued CONTENTS-—Continued Defense Department PaSe Land Management Bureau— Pase FEDERALlpEGISTER See Air Force Department. Continued V , m* ¿K Rules and regulations: Farmers Home Administration Utah; public land order.______5015 Published daily, except Sundays, Mondays, Rules and regulations: and days following official Federal holidays, Loans; farm ownership and soil Securities and Exchange Com­ by the Federal Register Division, National and water conservation; au­ mission Archives and Records Service, General Serv­ thentication of signatures for Notices: ices Administration, pursuant to the au­ insured lenders ____ 4997 Hearings, etc.: thority contained in the Federal Register Act, Key Oil & Gas (1955) Ltd___ 5025 approved July 26, 1935 (49 Stat. 500, as Federal 'Maritime Board Michigan Wisconsin Pipe Line amended; 44 U. S. C., ch. 8B), under regula­ Notices: Co. and American Natural tions prescribed by the Administrative Com­ Matson Navigation Co. and mittee of the Federal Register, approved by Gas Co______5026 the President. Distribution is made only by Fred. Olsen & Co.; agreement Standard Shares, Inc______5026 the Superintendent of Documents, Govern­ filed for approval______5018 United Corp______5025 ment Printing Office, Washington 25, D. C. Federal Power Commission The F ederal R egister will be furnished by Treasury Department mail to subscribers, free of postage, for $1.50 Notices: See Internal Revenue Service. per month or $15.00 per year, payable in, Hearings, etc.: advance. The charge for individual copies Department of Public Utili­ Veterans Administration (minimum 15 cents) varies in proportion to ties, Massachusetts and Rules and regulations: the size of the issue. Remit check or money Power Authority of New Servicemen’s Readjustment Act order, made payable to the Superintendent of Documents, directly to the Government York______^______5019 of 1944; Title III, Loan Guar­ Printing Office, Washington 25, D. C. Mosinee Paper Mills Co___ 5019 anty; supplemental loans__ _ 5015 The regulatory material appearing herein Ohio Fuel Gas Co______5019 Is keyed to the Code o f F ederal R egulations, Oil Associates, Inc., et al___ 5024 CODIFICATION GUIDE which is published, under 50 titles, pursuant to section 11 of the Federal Register Act, as Food and Drug Administration A numerical list of the parts of the Code amended August 5, 1953. The Code o f F ed­ Proposed rule making : of Federal Regulations affected by documents eral R egulations is spld by the Superin­ Pesticide chemicals; in or on published in this issue. Proposed rules, as tendent of Documents. Prices of books and raw agricultural commodities; opposed to final actions, are identified as pocket supplements vary. such. There are no restrictions on the re­ petition for exemption from publication of material appearing in the tolerance for residues of Title 3 Page F ederal R egister, or the C ode o f F ederal Diphenyl______5016 Chapter I (Proclamations): R egulations. Rules and regulations : 2351 (modified by Proc. 3145) ___ 4995 Pesticide chemicals; in or on 2450 (terminated by Proc.3145) _ 4995 raw agricultural commodities; 3140 (modified by Proc. 3146)__ 4995 CFR SUPPLEMENTS tolerances for residues of 3145 ______4995 Systox______.:_____ 4999 3146 ______;______4995 (As of January 1, 1956) Health, Education, and Welfare Chapter II (Executive orders): Department July 2, 1910 (revoked in part by The following Supplements are now PLO 1310) ______5015 available: See Food and Drug Administra­ Jan. 23,1912 (revoked in part by tion. PLO 1310)______: ___ 5015 Title 26 (1*954) Part 221 to Interior Department Title 6 end (Rev., 1955) See Land Management Bureau. ($2.25) Chapter III: Internal Revenue Service Part 332______4997 Title 38 ($2.00) Rules and regulations : Part 352______4997 Income tax; taxable years be­ Part 354___ 4997 Titles 44-45 ($1.00) ginning after Dec. 31, 1941; Title 7 contributions of employer to Chapter I: Title 50 ($0.60) employees’ trust or annuity Part 29___ 4998 plan and compensation under Chapter IX: Previously announced: Title 3, 1955 Supp. deferred-payment plan._____ 5000 Part 936______4998 ($2.00); Titles 4 and 5 ($1.00); Title 6 ($1.75); Income tax; taxable years be­ Title 7: Parts 1-209 ($1.25), Parts 210-899 Chapter XI: (Rev., 1955) with Supplement ($4.50), Parts ginning after Dec. 31,1953: Part 1101 (2 documents)__ 4998,4999 900-959 (Rev., 1955) ($6.00), Part 960 to end Banking institutions______5000 (Rev., 1955) with Supplement ($5.85); Title 8 Title 14 ($0.50); Title 9 ($0.70); Titles 10-13 ($0.70); Withholding tax on nonresi­ Title 14: Parts 1-300 ($2.50), Part 400 to end dent aliens and foreign cor­ Chapter I: ($1.00); Title 15 ($1.00); Title 16 ($1.25); Title Part 40______4999 17 ($0.60); Title 18 ($0.50); Title 19 ($0.50); porations and tax-free cov­ Title 20 ($1.00); Title 21 (Rev., 1955) ($5.50l; enant bonds______5006 Part 41------4999 Titles 22 and 23 ($1.00); Title 24 ($0.75); Title 25 ($0.50); Title 26 (1954) Parts 1-220 (Rev., Land Management Bureau Title 21 1955) ($2.00); Title 26: Parts 1-79 ($0.35), Parts 80-169 ($0.50), Parts 170-182 ($0.30), Parts Notices: Chapter I: 183-299 ($0.35), Part 300 to end, Ch. 1, and Acting Area Administrator et Part 120______;______4999 Title 27 ($1.00); Titles 28 and 29 ($1.25); Titles Proposed rules______5016 30 and 31 ($1.25); Title 32: Parts 1-399 ($0.60), al., Area I; delegation of au­ Parts 400-699 ($0.65), Parts 700-799 ($0.35), thority with respect to real Title 26 (1939) Parts 800-1099 ($0.40), Part 1100 to end property and related personal ($0.35); Title 32A (Rev., 1955) ($1.25); Title 33 Chapter I: ($1.50); Titles 35-37 ($1.00); Title 39 (Rev., property ______;______5018 Part 29____ 5000 1955) ($4.25); Titles 40-42 ($0.65); Title 43 Arizona; filing of plat of survey- 5017 ($0.50); Title 46: Paris 1-145 ($0.60), Part 146 Part 39______5000 to end ($1.25); Titles 47 and 48 ($2.25); Title Montana; order providing for 49: Parts 1-70 ($0.60), Parts 71-90 ($1.00), opening of public lands____ 5017 Title 26 (1954) Parts 91—164 ($0.50), Part 165 to end ($0.65) Oregon; small tract opening__ 5018 Chapter I: Proposed withdrawal and res­ Part 1 (2 documents)_____ 5000,5006 Order from Superintendent of Documents, ervation of lands: Government Printing Office, Washington Title 32 25, D. C. Alaska______.______- 5016 Arizona______5017 Chapter VTI: Colorado______5017 Part 864___ 5014 F riday, J u ly 6¿ 1956 FEDERAL REGISTER 4997

CODIFICATION GUIDE— Con. but such juices other than naranjilla Cherry juice, and other fruit juices and fruit juice inadvertently were not excepted sirups, not specially provided for, contain­ ing less than y2 of one per centum of alco­ Title 38 Pa€® from the description of products set forth hol (not including prune Juice,, prune Chapter I: in the said item 806 (a) ; sirup, or prune wine, and except pineapple Part 36_____— ------.— 5015 WHEREAS that portion of the descrip­ juice or sirup, naranjilla (solarium quito­ tion of products in item 1510 [second 1 in ense lam) and other citrus fruit juices, and Title 43 Part I of the said Schedule XX which fol­ naranjilla sirup). Chapter I: lows the last semicolon therein, was er­ (b) That item 1510 [second] in Part I Appendix (Public land orders) : roneously worded to provide for buttons of the said Schedule XX shall be applied 1310______5015 “wholly or in chief value of textile ma­ terial” instead of for buttohs “wholly or as though that portion of the description in part of textile material” : of products therein which follows the last quired or appropriate to carry out the NOW, THEREFORE, I, DWIGHT D. semicolon read as follows: “or wholly or Sixth Protocol of Supplementary Con*> EISENHOWER, President of the United in part of textile material”. cessions to the General Agreement on States of America, acting under and by IN WITNESS WHEREOF, I have here­ Tariffs and Trade, including the schedule virtue of the authority vested in me by unto set my hand and caused the seal of United States concessions (House Doc. the Constitution and the Statutes, in­ of the United States of America to be 421,84th Cong., 2d Sess.) ; cluding section 350 of the Tariff Act of affixed. WHEREAS the description of products 1930, as amended (48 Stat. (pt. 1) 943, DONE at the City of Washington this in item 806 (a) in Part I of Schedule XX ch. 474, 57 Stat. (pt. 1) 125, ch. 118, 59 29th day of June in the year of our annexed to the said Sixth Protocol of Stat. (pt. 1) 410, ch. 269, 63 Stat. (pt. 1) Lord nineteen hundred and Supplementary Concessions reads as 698, ch. 585, 69 Stat. 165, ch. 169), do [seal] fifty-six, and. of the Independ­ follows: proclaim, effective June 30,1956: ence of the United States of Cherry juice, and other fruit Juices and fruit (a) That the said Proclamation No.America the one hundred and eightieth. sirups, not specially provided for, contain­ 3140 of June 13, 1956, is hereby termi­ D wight D. Eisenhower ing less than % of one per centum of al- nated, to the extent that it shall be cohol (not including prune juice, prune applied as though the description of By the President: sirup, or prune wine, and except pineapple products in item 806 (a) in Part I of juice or sirup and naranjilla (solarium, H erbert H oover, Jr., Schedule XX to the Sixth Protocol of Acting Secretary of State. quitoense lam) juice or sirup) ; Supplementary Concessions to the Gen­ WHEREAS the said item 806 (a) was eral Agreement on Tariffs and Trade [P. R. Doc. 56-5411; Filed, July 5, 1956; not intended to cover citrus fruit juices, were stated as follows : 11:30 a.m .]

RULES AND REGULATIONS

TITLE 6— AGRICULTURAL CREDIT Ownership Loan)or 240A, “Bond (In­ stead of directly to the lender. In such sured Farm Ownership Loan).” The case, the State Director, or other au­ Chapter III— Farmers Home Adminis­ State Director also is authorized to sign thorized State Office official, will attest tration, Department of Agriculture the insurance endorsement. Execution on the reverse of the note the signature of of the insurance endorsement consti­ the different County Supervisor before Subchapter B— Farm Ownership Loans tutes the Government’s insurance of the sending the note to the lender. This will [FHA Instruction 443.2] loan. If for any reason it is not possible not be necessary when a local lender has for the same County Supervisor who no objection to a different signature on Part 332—P rocessing Initial Loans signed Form FHA-971 to sign the insur­ the insurance endorsement than that Subchapter D— Soil and Water Conservation ance endorsement on the promissory which appeared on Form FHA-971. Loans note, the original of the completed note (Sec. 6 (3), 50 Stat. 870, sec. 10 (a) (7), 68 [FHA Instructions 442.2 and 442.4] will be sent to the State Office, instead Stat. 735; 16 U. S. C. 590w (3), 590X-3 (a) of directly to the lender. In such case, (7)) Part 352—P rocessing Loans to the State Director, or other authorized Individuals § 354.8 Loan closing. * * • State Office official, will attest on the (b) Preparation of promissory note. Part 354—P rocessing Loans to reverse of the note the signature of the * * * Associations different County Supervisor before send­ (1) The County Supervisor is author­ ing the note to the lender. This will not AUTHENTICATION OP SIGNATURES FOR be necessary when a local lender has no ized to sign the insurance endorsement INSURED LENDERS on Form FHA-520. The State Director objection to a different signature on the also is authorized to sign the insurance Sections 332.13 (g), 352.4 (c) (2), and insurance endorsement than that which endorsement. Execution of the insur­ 354.8 (b) (1) of Title 6, Code of Federal appeared on Form FHA-971. ance endorsement constitutes the Gov­ Regulations (20 F. R. 8657, 21 F. R. 1227, (Sec. 41 (i), 60 Stat. 1066; 7 U. S. C. 1015 ( i)) ernment’s insurance of the loan. If for 20 F. R. 7214), are amended to provide any reason it is not possible for the same for authentication of the signature of § 352.4 Loan closing. * * * (c) Preparation of promissory note.County Supervisor who signed Form the County Supervisor who signs the in­ * * * FHA-971 to sign the insurance endorse­ surance endorsement on the promissory ment on the promissory note, the original note when someone else signed the re­ (2) The County Supervisor is author­of the completed note will be sent to the quest for issuance of the loan check by. ized to sign the insurance endorsement State Office, instead of directly to the an insured lender, and to read as on Form FHA-965 and Form FHA-965B. lender. In such case, the State Director, follows: The State Director also is authorized to sign the insurance endorsement. Execu­ or other authorized State Office official, § 332.13 Action by County Super­ tion of the insurance endorsement con­ will attest on the reverse of the note the visor following receipt of closing in­ stitutes the Government’s insurance of signature of the different County Super­ structions. * * * the loan. If for any reason it is not visor before sending the note to the (g) Insurance endorsement for in­possible for thq same County Supervisor lender. This will not be necessary when sured loan. The County Supervisor is who signed Form FHA-971 to sign the a local lender has no objection to a dif­ authorized to execute the insurance en­ insurance endorsement on the promis­ ferent signature on the insurance en­ dorsement on the reverse of Form FHA- sory note, the original of the completed dorsement than that which appeared on 240, “Promissory Note (Insured Farm note will be sent to the State Office, in­ Form FHA-971. 4998 RULES AND REGULATIONS

(Sec. 6 (3), 50 Stat. 870, sec. 10 (a) (7), 68 Chapter IX— Agricultural Marketing any box or container of Bartlett pears Stat. 735; 16 U. S. C. 590w (3), 590X-3 (a) unless: (7)) Service (Marketing Agreements and Orders), Department of Agriculture (1) All such pears grade not less than Dated: July 2,1956. U. S. No. 2; [Bartlett Pear Order 1 ] (ii) At least 75 percent by count of the [seal] H. C. S mith, pears contained in any box or container Acting Administrator, P art 936—F resh B artlett P ears, P lums, grade at least U. S. No. 1, except that Farmers Home Administration. AND E L B E R T A PEACHES GROWN IN such pears may fail to be fairly well [P. R. Doc. 56-5361; Piled, July 5, 1956; California formed only because of short shape but 8:52 a. m.] shall not be seriously misshapen; and REGULATION BY GRADES AND SIZES (iii) All such pears are of a size not § 936.537 Bartlett Pear Order 1—(a) smaller than the size known commer­ TITLE 7— AGRICULTURE Findings. (1) Pursuant to the market­ cially as size 180. ing agreement, as anjended, and Order (2) Section 936.143, sets forth the re­ Chapter I— Agricultural Marketing No. 36, as amended (7 CFR Part 936), quirements with respect to the inspection Service (Standards, Inspections, regulating the handling of fresh Bart­ and certification of shipments of Bartlett Marketing Practices), Department lett pears, plums, and Elberta peaches pears. Such section also prescribes the of Agriculture grown in the State of California, effec­ conditions which must be met if any tive under the applicable provisions of shipment is to be made without prior P art 29—T obacco Inspection the Agricultural Marketing Agreement inspection and certification. Notwith­ ORDER DESIGNATING TOBACCO AUCTION MAR­ Act of 1937, as amended (7 U. S. C. 601 et standing that shipments may be made KETS OP SWAINSBORO AND THOMASVILLE, seq.), and upon the basis of the recom­ without inspection and certification, each GA., AND MADISON, FLA. mendations of the Bartlett Pear Com­ shipper shall comply with all grade and Upon referenda conducted, pursuant modity Committee, established under size regulations applicable to the respec­ to prior notice (21 F. R. 4258), during the the aforesaid amended marketing agree­ tive shipment. period June 21, 1956-June 23, 1956, both ment and order, and upon other avail­ (c) Definitions. (1) Terms used in dates inclusive, among tobacco growers, able information, it is hereby found that the amended marketing agreement and who, during the 1955 marketing season, the limitation of shipments of Bartlett order shall, when used herein, have the sold tobacco at auction on the market pears, as hereinafter provided, will tend same meaning as is given to the respec­ at Swainsboro, Ga., on the market at to effectuate the declared policy of the tive term in said amended marketing Thomasville, Ga., and on the market at act. agreement and order. Madison, Fla., it is found that more (2) It is hereby further found that (2) “Size known commercially as size than two-thirds of the growers voting it is impracticable and contrary to the 180” means a size Bartlett pear that will in each such referendum favor the des­ public interest to give preliminary no­ pack a standard pear box, packed in ac­ ignation of each such market under sec­ tice, engage in public rule making pro­ cordance with the specifications of a tion 5 of the Tobacco Inspection Act (7 cedure, and postpone the effective date standard pack, with five tiers, each tier U. S. C. 511 et seq.) for the free and of this section until 30 days after pub­ having six rows with six pears in each mandatory inspection and certification lication thereof in the F ederal R egister row, and with the twenty-one smallest of tobacco sold on each such market. (60 Stat. 237; 5 U. S. C. 1001 et seq.) in pears weighing not less than five pounds. Therefore, pursuant to the authority that, as hereinafter set forth, the time (3) “Standard pear box” means the vested in the Administrator of the Agri­ intervening between the date when in­ container so designated in § 828.3 of the cultural Marketing Service, and for the formation upon which this section is Agricultural Code of California. purposes of said act, the orders of des­ based became available and the time (4) “U. S. No. 1,” “U. S. No. 2,” “fairly ignation of tobacco markets (7 CFR when this section must become effective well formed,” “seriously misshapen,” and 29.601) are amended by adding thereto in order to effectuate the declared policy “standard pack” shall have the same at the end thereof the following para­ of the act is insufficient; a reasonable meaning as when used in the United graph (tt) : time is permitted under the circum­ States Standards for Pears (summer and stances, for preparation for such effec­ fall), §§ 51.1260-51.1278 of this title. § 29.601 Designation of tobacco mar­ tive time; and good cause exists for (Sec. 5, 49 Stat. 753, as amended; 7 U. S. C. kets. * * * making the provisions hereof effective 608c) (tt) The tobacco markets at Swains­ not later than July 8, 1956. A reason­ boro, Georgia, Thomasville, Georgia, and able determination as to the supply of, Dated: July 2, 1956. Madison, Florida. Effective 30 days and the demand for, Bartlett pears must [seal] G. R. G range, after the date of publication in the F ed­ await the development of the crop and Acting Director, Fruit and Veg­ eral R egister no tobacco of any type adequate information thereon was not etable Division, Agricultural shall be offered for sale at auction on the available to the Bartlett Pear Commodity Marketing Service. market at Swainsboro, Georgia, on the Committee until June 26, 1956; recom­ market at Thomasville, Georgia, and on mendation as to the need for, and the [F. R. Doc 56-5360; Filed, July 5, 1956; the market at Madison, Florida, until extent of, regulation of shipments of 8:52 a. m.] such tobacco shall have been inspected such pears was made at the meeting of and certified by an authorized represent­ said committee on June 26, 1956, after ative of the U. S. Department of Agri­ consideration of all available informa­ culture according* to standards estab­ tion relative to the supply and demand Chapter XI— Agricultural Conserva­ lished under the Tobacco Inspection Act conditions for such pears, at which time tion Program Service, Department (7 U. S. C. 511 et seq.) : Provided, how­ the recommendation and supporting in­ of Agriculture ever, that such requirement of inspec­ formation was submitted to the Depart­ tion and certification may be suspended ment; shipments of the current crop of [ACP-1955, Supp. 16] at any time when it is found impracti­ such pears are expected to begin on or P art 1101—National Agricultural cable to provide inspection or when the about July 13, 1956; and this section Conservation quantity of tobacco available for inspec­ should be applicable to all shipments of tion is not sufficient to justify the cost such pears in order to effectuate the S ubpart— 1955 of such service. declared policy of the act; and compli­ establishment of additional acreages of (Sec. 14, 49 Stat. 734; 7 U. S. C. 511m) ance with the provisions of this section vegetative cover for green manure and will not require of handlers any prep­ FOR PROTECTION FROM EROSION Issued this 29th day of June 1956. aration therefor which cannot be com­ Pursuant to the authority vested in the [ seal] F rank E. B lood, pleted by the effective time hereof. Secretary of Agriculture under sections Acting Deputy Administrator, (b) Order. (1) During the period be­7-17 of the Soil Conservation and Do­ Agricultural Marketing Service. ginning at 12:01 a. m., P. s. t., July 8, mestic Allotment Act, as amended, and [F. R. Doc. 56-5347; Filed, July 5, 1956; 1956, and ending at 12:01 a. m., P. s. t., the Department of Agriculture Appro­ 8:49 a. m.] January 1, 1957, no shipper shall ship priation Act, 1955, the 1955 National F riday, J u ly 6, 1956 FEDERAL REGISTER 4999 Agricultural Conservation Program, ap­ third sentence to a comma and adding ,§ 40.390-3 Establishment of alternate proved July 1, 1954 (19 P. R. 4138), as the following: “except that the State airport landing minimums at airports amended August 3, 1954 (19 F. R. 4953), committee may authorize the harvesting served by ILS (CAA policies which apply September 15, 1954 (19 P. R. 6059), Oc­ of the growth for hay or silage in areas to § 40.390 (a) ). The landing mini­ tober 25, 1954 (19 P. R. 6910), March 1, where it determines that a serious short­ mums prescribed in § 40.390 (a) may be 1955 (20 F. R. 1336), April 7, 1955 (20 age of hay or silage exists due to adverse authorized at airports where the ILS is P. R. 2414), April 26,1955 (20 P. R. 2881), weather conditions and the growth har­ not equipped with approach lights. May 16, 1955 (20 P. R. 3494), June 10, vested is needed for use on farms in the (Sec. 205, 52 Stat. 984, as amended; 49 U. S. C. 1955 (20 P. R. 4209), June 14, 1955. (20 area.” 425. Interprets or applies secs. 601, 602, 52 P. R. 4281), July 22, 1955 (20 P. R. 5340), 3. Section 1101.797 (a) is amended byStat. 1007, 1010, as amended; 49 U. S. C. August 30, 1955 (20 P. R. 6511), Novem­ deleting the first sentence and substitut­ 551,554) ber 10,1955 (20 F. R. 8491), February 21, ing therefor the following: This supplement shall become effective 1956 (21 P. R. 1261), March 14, 1956 (21 This practice is applicable in the fol­ July 12,1956. P. R. 1717), and April 20, 1956 (21 F. R. lowing counties: 2651), is further amended as follows: Colorado. Adams, Arapahoe, Baca, Bent, [seal] C. J. Lowen, Section 11Q1.687 is amended by chang­ Boulder, Cheyenne, Crowley, Elbert, El Paso, Administrator of Civil Aeronautics. ing the period at the end of the third Huerfano, Kiowa, Kit Carson, Larimer, Las [F. R. Doc. 56-5330; Filed, July 5, 1956; sentence to a comma and adding the Animas, Lincoln, Logan, Morgan, Otero, 8:45 a. m.] following: “except that the State com­ Prowers, Pueblo, Washington, Weld, Yuma. mittee may authorize the harvesting of Kansas. Barber, Barton, Cheyenne, Clark, Cloud, Comanche, Decatur, Edwards, Ellis, the growth for hay or silage in areas Ellsworth, Finney, Ford, Gove, Graham, where it determines that a serious short­ Grant, Gray, Greeley, Hamilton, Harper, Har­ [Supp. 27] age of hay or silage exists due to adverse vey, Haskell, Hodgeman, Jewell, Kearny, weather conditions and the growth har­ Kingman, Kiowa, Lane, Lincoln, Logan, Mc­ P art 41—Certification and Operation vested is needed for use on farms in the Pherson, Meade, Mitchell, Morton, Ness, Nor­ R ules for Scheduled Air Carrier area.” ton, Osborne, Ottawa, Pawnee, Phillips, Pratt, Operations Outside the Continental Rawlins, Reno, Republic, Rice, Rooks, Rush, Limits of the U nited S tates (Sec. 4, 49 Stat. 164; 16 U. S. C. 590d. Inter­ Russell, Saline, Scott, Sedgwick, Seward, prets or applies secs: 7-17, 49 Stat. 1148, as Sheridan, Sherman, Smith, Stafford, Stanton, ALTERNATE AIRPORT LANDING MINIMUMS amended, 68 Stat. 311; 16 U. S. C. 590g-590q) Stevens, Sumner, Thomas, Trego, Wallace, Done at Washington, D. C., this 29th Wichita. This supplement is issued to permit day pf June 1956. New Mexico. Colfax, Curry, Harding, Lea, the authorization of alternate airport Roosevelt, Quay, Socorro, Torrance, Union, landing m inim um s of as low as 600-2 at [ se a l ] E. L. P e t e r s o n , Santa Fe. airports where the ILS is not equipped Assistant Secretary. Oklahoma. Beaver, Cimarron, Ellis, Roger with approach lights. Mills, Texas. [P. R. Doc. 56-5348; Filed, July 5, 1956; Texas. Andrews, Armstrong, Bailey, Bay­ Section 41.1-4 is amended by adding 8:49 a. m.] lor, Borden, Briscoe, Carson, Castro, Chil­ a paragraph (d) to read as follows: dress, Cochran, Coke, Collingsworth, Cottle, § 41.1-4 Ceiling and visibility mini­ Crosby, Dallam, Dawson, Deaf Smith, Dick­ mums (CAA policies which apply to ens, Donley, Fisher, Floyd, Foard, Gkines, [ACP-1956, Supp. 6] Garza, Glasscock, Gray, Hale, HaU, Hansford, § 41.1). • * * Hardeman, Hartley, Haskell, Hemphill, Hock­ (d) Establishment of alternate air­ Part 1101—National Agricultural ley, Howard, Hutchinson, Jones, Kent, King, port landing minimums at airports Conservation Knox, Lamb, Lipscomb, Lubbock, Lynn, Mar­ served by ILS. Alternate airport land­ tin, Midland, Mitchell, Moore, Motley, Nolan, ing minimums of 600-2, 700-1 x/2, or S ubpart— 1956 Ochiltree, Oldham, Parmer, Potter, Randall, 800-1 may be authorized at airports ESTABLISHMENT OF VEGETATIVE COVER FOR Roberts, Runnels, Scurry, Sherman, Sterling, where the ILS. is not equipped with ap­ Stonewall, Swisher, Taylor, Terry, Tom Green, SUMMER PROTECTION FROM EROSION; ES­ Wheeler, Wilbarger, Yoakum. proach lights. TABLISHMENT OF VEGETATIVE COVER FOR Wyoming. Goshen, Platte. (Sec. 205, 52 Stat. 984, as amended 49 U. S. C. GREEN MANURE AND FOR PROTECTION FROM 425. Interprets or applies secs. 601, 602, 52 e r o s io n ; EMERGENCY WIND EROSION (Sec. 4, 49 Stat. 164; 16 U. S. C. 590d. In­ Stat. 1007, 1010, as amended; 49 U. S. O. 551, terpret or apply secs. 7-17, 49 Stat. 1148, as 554) CONTROL MEASURES amended, 69 Stat. 55, 64 Stat. 1109, 66 Stat. Pursuant to the authority vested in the 64; 16 U. S. C. 590g-590q, 42 U. S. C. 1855) This supplement shall become effec­ Secretary of Agriculture under sections Done at Washington, D. C., this 29th tive July 12, 1956. 7-17 of the Soil Conservation and Do­ day of June 1956. [seal] C. J. Lowen, mestic Allotment Act, as amended, the Administrator of Civil Aeronautics. Department of Agriculture and Farm [seal] E. L. P eterson, Credit Administration Appropriation Assistant Secretary. [F. R. Doc. 56-5331; Filed, July 5, 1956;' Act, 1956, and Public Law 875, 81st Con­ [F. R. Doc. 56-5349; Filed, July 5, 1956; 8:45 a. m.] gress, the 1956 National Agricultural 8:49 a. m.] Conservation Program, approved June 14,1955 (20 F. R. 4281), as amended July TITLE 21— FOOD AND DRUGS 22, 1955 (20 P. R. 5341), August 30, 1955 TITLE 14— CIVIL AVIATION (20 P. R. 6511), November 10, 1955 (20 Chapter I— Food and Drug Adminis­ P. R. 8491), April 9,1956 (21 F. R. 2372), Chapter I— Civil Aeronautics Board tration, Department of Health, Edu­ and April 20, 1956 (21 F. R. 2651), is cation, and Welfare further amended as follows: Subchapter A— Civil Air Regulations 1. Section 1101.786 is amended by [Supp.24] Subchapter B— Food and Food Products changing the period at the end of the P art 40—S cheduled Interstate Air Car- P art 120—T olerances and Exemptions second sentence to a comma and adding rier Certification and Operation P rom T olerances for P esticide Chem­ the following “except that the State R ules icals in or on R aw Agricultural Com ­ committee may authorize the harvesting of the growth for hay or silage in areas ALTERNATE AIRPORT LANDING MINIMUMS modities where it determines that a serious short­ This supplement is issued to permit the TOLERANCES FOR RESIDUES OF SYSTOX age of hay or silage exists due to adverse authorization of alternate airport land­ weather conditions and the growth har­ ing minimums of as low as 600-2 at A petition was filed with the Pood and vested is needed for use on farms in the airports where the ILS is not equipped Drug Administration requesting the area.” with approach lights. establishment of tolerances for residues 2. Section 1101.787 is amended by Section 40.390-3 is added to read as of Systox in or on certain raw agricul­ changing the period at the end of the follows: tural commodities.

\ 5000 RULES AND REGULATIONS The Secretary of Agriculture has cer­ TITLE 26— INTERNAL REVENUE P ar. 4. The second paragraph, which tified that this pesticide chemical is use­ is undesignated, of § 29.165-1 (a) of ful for the purposes for which tolerances Chapter 1—Internal Revenue Service, Regulations 111, as amended by Treasury are being established. Department of the Treasury Decision 5422, approved December 13, After consideration of the data sub­ 1944, and Treasury Decision 6033, ap­ mitted in the petition and other relevant Subchapter A— Income and Excess Profits Taxes proved July 27, 1953, is further amended material which show that the tolerances [T. D. 6189; Regs. I ll, 118] by striking the sixth, seventh, and established in this order will protect the eighth sentences thereof and substitut­ P art 29—Income T ax ; T axable Y ears ing the following: “A profit-sharing public health, and by virtue of the au­ B eginning After D ecember 31,1941 thority vested in the Secretary of Health, plan, on the other hand, is a plan estab­ Education, and Welfare by the Federal P art 39—Income T ax; T axable Y ears lished and maintained by an employer Food, Drug, and Cosmetic Act (sec. 408 B eginning After D ecember 31,1951 to provide for the participation in his (d) (2), 68 Stat. 512; 21 U. S. C. 346a (d) profits, by his employees or their bene­ contributions o f a n e m p l o y e r t o a n ficiaries, based on a definite predeter­ (2) ) and delegated to the Commissioner e m p l o y e e s ’ t r u s t or a n n u i t y p l a n a n d of Food and Drugs by the Secretary (21 mined formula for allocating the compensation u n d e r a d e fe r r e d - p a y ­ contributions made to the plan among CFR 120.7 (g) ), the regulations for toler­ m e n t PLAN ances for pesticide chemicals in or on the participants and for distributing the raw agricultural commodities (21 CFR In Order to conform Regulations 118 funds accumulated under the plan Part 120; 21 F. R. 301) are amended by (26 CFR (1939) Part 39) and Regula­ after a fixed number of years, the attain­ changing § 120.105 to read as follows: tions 111 (26 CFR (1939) Part 29), re­ ment of a stated age, or. upon the prior lating. to income taxes, to the decisions occurrence of some event such as illness, § 120.105 Tolerances for residues of in Saalfield Publishing Company v. Com­ disability, retirement, death, or sever­ Systox (0,0 -diethyl- (2-ethylmercapto- missioner (1948) 11 T. C. 756 (A., C. B. ance of employment. A formula for al­ ethyl) thiophosphate, a mixture of thiono 1952-2, 3), Philadelphia Suburban locating the contributions among the and thiol isomers'). Tolerances for resi­ Transportation Company v. Smith participants is definite if, for example, it dues of Systox (0,0-diethyl-(2-ethyl- (1952) 105 F. Supp. 650, Lincoln Electric provides for an allocation in proportion mercaptoethyl) thiophosphate, a mix­ Co. Profit-Sharing Trust, et al. v. Com­ to the basic compensation of each par­ ture of thiono and thiol isomers) and missioner (CA 6th, 1951) 190 F. 2d 326, ticipant. A plan (whether or not it con­ derived anticholinesterase products as Commissioner v. Produce Reporter Com­ tains a definite predetermined formula determined by in vitro cholinesterase in­ pany (CA 7th, 1953) 207 F. 2d 586, and for determining the profits to be shared hibition of pooled human plasma, using McClintock-Trunkey Company v. Com­ with the employees) does not qualify technical Systox as a standard (this missioner (CA 9th, 1954) 217 F. 2d 329, under section 165 (a) if the contributions standard effects 50-percent inhibition of such regulations are hereby amended as to the plan are made at such times or in pooled human plasma cholinesterase at follows; such amounts that the plan in opera­ a concentration of 0.3±0.025 part per P aragraph 1. Section 39.23 (p)-6 (e) tion discriminates ' in favor of officers, million in water as a medium) are estab­ of Regulations 118 is amended by strik­ shareholders, persons whose principal lished as follows: ing the last sentence thereof. duties consist in supervising the work (a) 5 parts per million in or on al­ P ar. 2. Section 39.165-1 (a) (2) of of other employees, or highly compen­ mond hulls. Regulations 118 is amended by striking sated employees. For the rules with re­ (b) 1.25 parts per million in or on the sixth, seventh, and eighth sentences spect to discrimination, see §§ 29.165-3 grapes. thereof and substituting the following: and 29.165-4.” (c) 0.75 part per million in or on al­ “A profit-sharing plan, on the other Because the purpose of this Treasury monds, apples, broccoli, brussels sprouts, hand, is a plan established and main­ decision is merely to eliminate from the cabbage, cauliflower, grapefruit, lemons, tained by an employer to provide for the regulations provisions which the courts lettuce, mushmelons, oranges, pears, pe­ participation in his profits, by his em­ have held to be invalid, it is found that cans, potatoes, strawberries, walnuts. ployees or their beneficiaries, based on it is unnecessary to issue this Treasury (d) 0.3 part per million in or on beans. a definite predetermined formula for al­ decision with notice and public proce­ locating the contributions made to the dure therepn under section 4 (a) of the Any person who will be adversely af­ plan among the participants and for Administrative Procedure Act, approved fected by the foregoing order may, at any distributing the funds accumulated under June 11, 1946, or subject to the effective time prior to the thirtieth day from the the plan after a fixed number of years, date limitation of section 4 (c) of said effective date thereof, file with the Hear­ the attainment of a stated age, or upon act. ing Clerk, Department of Health, Edu­ the prior occurrence of some event such (53 Stat. 32, 467; 26 U. S. C. 62, 3791. Inter­ cation, and Welfare, Room 5440, 330 as illness, disability, retirement, death, pret or apply sec. 211, 53 Stat. 867, as Independence Avenue SW., Washington or severance of employment. A formula amended; 26 U. S. C. 23) 25, D. C., written objections thereto. Ob­ for allocating the contributions among [seal] R ussell C. Harrington, jections shall show wherein the person the participants is definite if, for ex­ Commissioner of Internal Revenue. filing will be adversely affected by this ample, it provides for an allocation in order, specify with particularity the pro­ proportion to the basic compensation of Approved: July 2,1956. visions of the order deemed objectionable each participant. A plan (whether or D an T hroop S mith, and reasonable grounds or the objec­ not it contains a definite predetermined Special Assistant to the Secretary tions, and request a public hearing upon formula for determining the profits to be in Charge of Tax Policy. the objections. Objections may be ac­ shared with the employees) does not [F. R. Doc. 56-5359; Filed, July 5, 1956; companied by a memorandum or brief qualify under section 165 (a) if the con­ 8:51 a. m.] in support thereof. All documents shall tributions to the plan are made at such be filed in quintuplicate. times or in such amounts tha£ the plan Effective date. This order shall be ef­ in operation discriminates in favor of of­ TITLE 26— INTERNAL REVENUE, fective upon publication in the F ederal ficers, shareholders, persons whose prin­ 1954 R egister. cipal duties consist in supervising the Chapter I— Internal Revenue Service, (Sec. 701, 52 Stat. 1055, as amended; 21 work of other employees, or highly com­ U. S. C. 371. Interprets or applies sec. 408, pensated employees. For the rules with Department of the Treasury 68 Stat. 511; 21 U. S. C. 346a) respect to discrimination, see §§ 39.165-3 Subchapter A— Income Tax and 39.165-4.” Dated: June 28,1956. [T. D. 6188] P ar. 3. The last undesignated para­ [seal] J ohn L. H arvey, graph of §29.23 (p)-6 of Regulations P art 1—Income T ax; T axable Y ears Deputy Commissioner 111, as amended by Treasury Decision B eginning After D ecember 31, 1953 of Food and Drugs. 5666, approved November 2, 1948, is banking institutions [F. R. Doc. 56-5333; Filed. July 5, 1956; further amended by striking the last On October 25,1955, notice of proposed 8:45 a. m.J sentence thereof. rule making regarding the regulations Friday y July 6, 1956 FEDERAL REGISTER 5001 under subchapter H of chapter 1 of the laws of the United States (including laws 80 percent of each class of stock of another Internal Revenue Code of 1954, approved relating to the District of Columbia), of bank, stock in such other bank shall not be any State, or of any Territory, a substantial treated as a capital asset. August 16, 1954, was published in the part of the business of which consists of re­ (c) Bond, etc., losses of banks. For pur­ Federal R egister (20 F. R. 7992). After ceiving deposits and making loans and dis­ poses of this subtitle, in the case of a bank, consideration of such relevant sugges­ counts, or of exercising fiduciary powers simi­ if the losses of the taxable year from sales tions as were presented by interested lar to those permitted to national banks un­ or exchanges of bonds, debentures, notes, or persons regarding the proposals, the fol­ der section 11 (k) of the Federal Reserve Act certificates, or other evidences of indebted­ (38 Stat. 262; 12 U. S. C. 248 (k) ), and which ness, issued by any corporation (Including lowing regulations are hereby adopted: is subject by law to supervision and exami­ one issued by a government or political sub­ B a n k i n g I nstitutions nation by State, Territorial, or Federal au­ division thereof), with interest coupons or thority having supervision over banking in­ in registered form, exceed the gains of the RULES OF GENERAL APPLICATION TO BANKING stitutions. Such term also means a domes­ taxable year from such sales or exchanges, INSTITUTIONS tic building and loan association. no such sale or exchange shall be considered See. a sale or exchange of a capital asset. 1.581 Statutory provisions; definition of § 1.581-1 Tax on banks. A bank, as bank. defined in section 581, is subject to the § 1.582-1 Bad debt and loss deduc­ 1.581- Tax 1 on banks. tax on corporations imposed by section tion with respect to securities held by 1.581- 2 Mutual savings banks, building and 11. banks, (a) A bank, as defined in section loan associations, and cooperative 581, is allowed a deduction for bad debts banks. § 1.581-2 Mutual savings banks, build­ to the extent and in the manner pro­ 1.582 Statutory provisions; bad debt and ing and loan associations, and coopera­ loss deduction with respect to vided by subsections (a), (b), and (c) of tive banks, (a) Mutual savings banks, section 166 with respect to a debt which securities held by banks. building and loan associations, and co­ 1.582-1 Bad debt and loss deduction with has become worthless in whole or in part respect to securities held by operative banks not having capital stock and which is evidenced by a security (a banks. represented by shares are subject to tax bond, debenture, note, certificate, or 1.583 Statutory provisions; deductions of as in the case of other corporations. other evidence of indebtedness to pay a dividends paid on certain pre­ For-special rules governing the taxation fixed or determinable sum of money) is­ ferred stock. of a mutual savings bank conducting a sued by any corporation (including gov­ 1.584 Statutory provisions; common trust life insurance business, see section 594 ernments and their political subdivi­ funds. and § 1.594-1. 1.584- Common 1 trust funds. sions) , with interest coupons or in reg­ 1.584- 2 Income of participants in common (b) While the general principles for istered form. trust fund. determining the taxable income of a cor­ (b) For purposes of section 165 (g) 1.584- 3 Computation of common trust fund poration are applicable to a mutual sav­ (1), relating to the deduction for losses income. ings bank, a building and loan associa­ involving worthless securities, if the tax­ Ì.584-4 Admission and withdrawal of par­ tion, and a cooperative bank not having payer is a bank (as defined in section ticipants in the common trust capital stock represented by shares, 581) and owns directly at least 80 percent fund. there are certain exceptions and special of each class of stock of another bank, 1.584- 5 Returns of banks with respect to rules governing the computation in the common trust funds. stock in such other bank shall not be 1.584- 6 Net operating loss deduction. case of such institutions. See section treated as a capital asset. 593 and § 1.593-1 for special rules con­ (c) With respect to the taxation under MUTUAL SAVINGS BANKS, ETC. cerning additions to reserves for bad subtitle A of a bank (as defined in sec­ 1.591 Statutory provisions; deduction for debts. See section 591 and § 1.591-1, re­ tion 581), if the losses of the taxable year dividends paid on deposits. lating to dividends paid by banking cor­ from sales or exchanges of bonds, de­ 1.591-1 Deduction for dividends paid on porations, for special rules concerning bentures, notes, or certificates, or other deposits. deductions for amounts paid to, or evidences of indebtedness, issued by any 1.592 Statutory provisions; deduction for credited to the accounts of, depositors repayment of certain loans. corporation (including one issued by a 1.5921-1 Repayment of certain loans by or holders of withdrawable accounts as government or political subdivision mutual savings banks, building dividends. See also section 592 and thereof), with interest coupons or in reg­ and loan associations, and cooper­ § 1.592-1, relating to deductions for re­ istered form, exceed the gains of the ative banks. payment of certain loans. taxable year from such sales or ex­ 1.593 Statutory provisions; additions to (c) For the purpose of computing the changes, no such sale or exchange shall reserve for bad debts. net operating loss deduction provided in 1.593- Additions 1 to reserve for bad debts. be considered a sale or exchange of a section 172, any taxable year for which capital asset. 1.593- 2 Additions to reserve for bad debts a mutual savings bank, building and loan where surplus, reserves, and un­ association, or a cooperative bank not § 1.583 Statutory provisions; deduc­ divided profits equal or exceed 12 tions of dividends paid on certain pre­ percent of deposits or withdraw­ having capital stock represented by able accounts. shares was exempt from tax shall be ferred stock. 1.594 Statutory provisions; alternative disregarded. Thus, no net operating loss Sec. 583. Deductions of dividends paid on tax for mutual savings banks carryover shall be allowed from a taxable certain preferred stock. In computing the conducting life insurance busi­ year beginning before January 1, 1952, taxable income of any national banking as­ ness. and, in the case of any taxable year be­ sociation, or of any bank or trust company 1.594-1 Mutual savings banks conducting organized under the laws of any State, Terri­ life insurance business. ginning after * December 31, 1951, the tory, possession Of the United States, or the amount of the net operating loss carry­ Canal Zone, or of any other.banking cor­ BANK AFFILIATES back or carryover from such year shall poration engaged in the business of indus­ 1.601 Statutory provisions; special deduc­ not be reduced by reference to the income trial banking and under the supervision of tion for bank affiliates. of any taxable year beginning before a State banking department or of the Comp­ 1.601-1 Special deduction for bank affiliates. January 1, 1952. troller of the Currency, or of any incorpo­ rated domestic insurance company, there A u t h o r i t y : §§ 1.581 to 1.601-1 Issued un­ § 1.582 Statutory provisions; bad debt shall be allowed as a deduction from gross der sec. 7805, 68A Stat. 917; 26 U. S. C. 7805. and loss deduction with respect to securi­ income, in addition to deductions otherwise Interpret or apply sec. 584, 68 Stat. 203; 26 ties held by banks. provided for in this subtitle, any dividend U. S. C. 7805. (not including any distribution in liquida­ Sec. 582. Bad debt and loss deduction with tion) paid, within the taxable year, to the ' B anking I nstitutions respect to securities held by banks—(a) United States or to any instrumentality Securities. Notwithstanding sections 165 RULES OF GENERAL APPLICATION TO BANKING thereof exempt from Federal Income taxes, (g) (1) and 166 (e), subsections (a), (b), on the prefered stock of the corporation INSTITUTIONS and (c) of section 166 (relating to allowance owned by the United States or such instru­ § 1.581 Statutory provisions; defini­ of deduction for bad debts) shall apply in mentality. The amount allowable as a de­ the case of a bank to a debt which is evi­ duction under this section shall reduce the tion of bank. denced by a security as defined in section deduction for dividends paid otherwise com­ Sec. 581. Definition of bank. For pur­ 165 (g) (2) (C). puted under section 561. poses of sections 582 and 584, the term (b) Worthless stock in affiliated bank. “bank” means a bank or trust company in­ For purposes of section 165 (g) (1), where the § 1.584 Statutory provisions; com­ corporated and doing business under the taxpayer is a bank and owns directly at least mon trust funds. 5002 RULES AND REGULATIONS

S ec. 584. Common trust funds—(a) Defini­ from that of a participant, the inclusions (3) Its proportionate share of the tions. For purposes of this subtitle, the with respect to the taxable income of the ordinary taxable income or the ordinary term “common trust fund” means a fund common trust fund, in computing the tax­ net loss of the common trust fund, com­ maintained by a bank— able income of the participant for its tax­ puted as provided in § 1.584-3. (1) Exclusively for the collective invest­ able year, shall be based upon the taxable ment and reinvestment of moneys contrib­ income of the common trust fund for any (b) (1) Each participant's proportion­ uted thereto by the bank in its capacity as taxable year of the common trust fund end­ ate share in the amount of dividends to a trustee, executor, administrator, or guard­ ing within or with the taxable year of the which section 34 or section 116 applies ian; and participant. received by the common trust fund shall (2) In conformity with the rules and reg­ (g) Net operating loss deduction. The be deemed to have been received by such ulations, prevailing from time to time, of the benefit of the deduction for net operating participant as such dividends. Board of Governors of the Federal Reserve losses provided by section 172 shall not be (2) Each participant’s proportionate System pertaining to the collective invest­ allowed to a common trust fund, but shall be ment of trust funds by national banks. allowed to the participants in the common share in the amount of partially tax (b) Taxation of common trust funds. A trust fund under regulations prescribed by exempt interest described in section 35 common trust fund shall not be subject to the Secretary or his delegate. or section 242 received by the common taxation under this chapter and for purposes trust fund shall be deemed to have been of this chapter shall not be considered a § 1.584-1 Common trust funds—(a) received by such participant as such in­ corporation. >■ Method of taxation. A common trust terest. If the common trust fund elects (c) Income of participants in fund— (1) fund maintained by a bank is not sub­ under section 171 (relating to amortiz­ Inclusions in taxable income. Each partici­ ject to taxation under this chapter and able bond premium) to amortize the pant in the common trust fund in comput­ is not considered a corporation. Its premium on such obligations, for pur­ ing its taxable income shall include, whether participants are taxed on their propor­ poses of the preceding sentence the pro­ or not distributed and whether or not tionate share of income from the com­ distributable— portionate share of each participant of (A) As part of its gains and losses from mon trust fund. Except as otherwise such interest received by the fund shall sales or exchanges of capital assets held for provided in §§ 1.584-1 to 1.584-6, inclu­ be his proportionate share of such in­ not more than 6 months, its proportionate sive, the term “participant” refers to terest (determined without regard to share of the gains and losses of the common any trust or estate, the moneys of which this sentence) reduced by so much of the trust fund from sales or exchanges of capital have been contributed to the common deduction under section 171 as is at­ assets held for not more than 6 months; trust fund. tributable to such shares. See section (B) As part of its gains and losses from (b) Conditions for qualification. Un­ sales or exchanges of capital assets held for 171 and the regulations thereunder. more than 6 months, its proportionate share der section 584, two conditions must be (3) Any tax withheld at the source of the gains and losses of the common trust satisfied by a fund maintained by a bank from income of the fund shall be deemed fund from sales or exchanges of capital assets (as defined in section 581) before such to have been withheld proportionately held for more than 6 months; fund may be designated as a “common from the participants to whom such in­ (C) Its proportionate share of the ordi­ trust fund.” These conditions are that come is allocated. nary taxable income or the ordinary net loss such fund must be maintained by such of the common trust fund, computed as pro­ (c) (1) The proportionate share of vided in subsection (d). a bank: each participant in gains and losses from (2) Dividends and partially tax exempt (1) Exclusively for the collective in­ sales or exchanges of capital assets held interest. The proportionate share of each vestment and reinvestment of moneys for not more than six months,, gains and participant in the amount of dividends to contributed thereto by the bank, whether losses from sales or exchanges of capital which section 34 or section 116 applies, and acting alone or in conjunction with one assets held for more than six months, in the amount of partially tax exempt inter­ or more co-fiduciaries, but solely in its ordinary taxable income or ordinary net est on obligations described in section 35 or capacity: (i) As a trustee of a trust loss, dividends received, partially exempt section 242, received by the common trust created by will, deed, agreement, declar­ fund shall be considered for purposes of such interest, and tax withheld at the source sections as having been received by such par­ ation of trust, or order of court, (ii) as shall be determined under the method ticipant. If the common trust fund elects an executor of the will of, or as an ad­ of accounting adopted by the bank in under section 171 (relating to amortizable ministrator of the estate of, a deceased accordance with the written plan under bond premium) to amortize the premium on person, or (iii) as a guardian (by what­ which the common trust fund is estab­ 6uch obligations, for purposes of the preced­ ever name known under local law) of lished and administered, provided such ing sentence the proportionate share of the the estate of an infant, of an incompe­ method clearly reflects the income of 'participant of such interest received by the tent individual, or of an absent individ­ common trust fund shall be his proportion­ each participant. ate share of such interest (determined with­ ual; and (2) The items of income and deduc­ out regard to this sentence) reduced by so (2) In conformity with the rules and tions are, therefore, to be allocated to much of the deduction under section 171 as regulations, prevailing from time to time, the periods between valuation dates with­ is attributable to such share. of the Board of Governors of the Federal in the taxable year established by such (d) Computation of common trust fund Reserve System pertaining to the col­ plan in which they were realized or sus­ income. The taxable income of,a common lective investment of trust funds by na­ trust fund shall be computed in the same tional "banks, whether or not the bank tained, and the ordinary taxable income manner and on the same basis as in the or ordinary net loss, gains and losses case of an individual, except that— maintaining such fund is a national bank from sales or exchanges of capital assets (1) There shall be segregated the gains or a member of the Federal Reserve Sys­ held for not more than six months, and and losses from sales or exchanges of capital tem. gains and losses from sales or exchanges assets; § 1.584-2 Income of participants in of capital assets held for more than six (2) After excluding all items of gain and common trust fund, (a) Each partici­ loss from sales or exchanges of capital assets, months computed for each such period. there shall be computed— pant in a common trust fund is required The proportionate shares of the partici­ (A) An ordinary taxable income which to include in computing its taxable in­ pants in such items are then to be de­ shall consist of the excess of the gross income come for its taxable year within which termined. over deductions; or or with which the taxable year of the (3) The provisions of subparagraph (B) An ordinary net loss which shall con­ fund ends, whether or not distributed (2) of this paragraph may be illustrated sist of the excess of the deductions over the and whether or not distributable: by the following example: gross income; (1) Its proportionate share of the (3) The deduction provided by section 170 Example. (i)-The plan of a common trust (relating to charitable, etc., contributions gains and losses from sales or exchanges fund provides for quarterly valuation dates and gifts) shall not be allowed; and of capital assets held for not more than and for the computation and the distribu­ (4) The standard deduction provided in six months, computed as provided in tion of the income upon a quarterly basis, section 141 shall not be allowed. § 1.584-3, as part of its gains and losses except that there shall be no distribution (e) Admission and withdrawal. No gain from sales or exchanges of capital assets of capital gains. The participants are as fol­ or loss shall be realized by the common, trust held for not more than six months; lows: Trusts A, B, C, and D for the first fund by the admission or withdrawal of a (2) Its proportionate share of the quarter; Trusts A, B, C, and E for the sec­ participant. The withdrawal of any par­ gains and losses from sales or exchanges ond quarter; and Trusts A, B, F, and G for ticipating interest by a participant shall be the third and fourth quarters, the partici­ treated as a sale or exchange of such interest of capital assets held for more than pants having equal participating interests. by the participant. six months, computed as provided in As computed upon the quarterly basis, the (f) Different taxable years of common § 1.584-3, as part of its gains and losses ordinary taxable income, the short-term cap­ trust fund and participant. If the taxable from sales or exchanges of capital assets ital gain, and the long-term capital loss for year of the common trust fund is different held for more than six months; and the taxable year were as follows: Friday, July 6, 1956 FEDERAL REGISTER 5003 (a) No deduction shall be allowed ticipating interest or portion thereof under section 170 (relating to charitable, withdrawn. Such basis shall not be re­ etc., contributions and gifts) ; duced on account of the segregation of (b) The gains and losses from sales any investment in the common trust or exchanges of capital assets of the fund pursuant to the provisions of sub­ Second quarterSecond Third quarter Fourthquarter Total •First quarter common trust fund are required to be division (c) (7) of section 17 of Regu­ segregated. A common trust fund is not lation F of the, Board of Governors of Ordinary taxable Income.. $200 $300 $200 $400 $1,100 allowed the benefit of the capital loss the Federal Reserve System, as amended. Short-tenn capital gain__ 200 100 200 100 600 carryover provided by section 1212; For the purpose of making the adjust­ Long-term capital loss___ 100 200 100 200 600 (c) The ordinary taxable income (the ments, additions, and reductions with excess of the gross income over deduc­ respect to basis as prescribed in this (ii) The participants’ shares of ordinary tions) or the ordinary net loss (the ex­ paragraph, the ward, rather than the taxable Income are as follows: cess of the deductions over the gross guardian, shall be deemed to be the par­ Participants’ Shares of Ordinary Taxable Income income) shall be computed after' exclud­ ticipant; and the grantor, rather than ing all items of gain and loss from sales the trust, shall be deemed to be the par­ First Second Third Fourth or exchanges of capital assets; and ticipant, to the extent that the income Participant quarter quarter quarter quarter Total (d) The standard deduction provided of the trust is taxable to the grantor in section 141 shall not be allowed. under subpart E of part I of sub­ a ______$60 $75 $50 $100 $275 chapter J. B ..._ . 60 75 50 100 275 § 1.584-4 Admission and withdrawal (c) Additions to basis. As prescribed 60 75 125 of participants in the common trust 60 50 in paragraph (b) of this section, in com­ f * é .. m s 75 75 fund—(a) Gain or loss. The common puting the gain or loss upon the with­ F 60 100 160 trust fund realizes no gain or loss by the O'. . HH: n » 150 drawal of a participating interest or por­ 60 100 admission or withdrawal of a participant, tion thereof, there shall be added to the Total. 200 300 200 400* 1,100 and the basis of the assets and the period basis of the participating interest or por­ for which they are deemed to have been tion thereof withdrawn an amount equal held by the common trust fund for the (iii) The participants’ shares of the short­ to the aggregate of the following items term capital gain are as follows: purposes of section 1202 are unaffected (to the extent that they were properly by such an admission or withdrawal. If allocated to the participant for a taxable Participants’ Shares of Short-Term Capital Gain a participant withdraws the whole or any year of the common trust fund and were part of its participating interest from the not distributed to the participant prior Participant First Second Third Fourth Total common trust fund, such withdrawal to withdrawal): quarter quarter quarter quarter shall be treated as a sale or exchange by (1) Wholly exempt income of the the participant of the participating common trust fund for any taxable year, . ï W B B Ë Î $50 $25 $50 $25 $150 interest or portion thereof which is so B______50 25 60 25 150 (2) Net income of the common trust O 60 25 75 withdrawn. A participant is not deemed fund for the taxable years beginning 60 50 to have withdrawn any part of its par­ : 25 25 after December 31, 1935, and prior to 50 25 75 ticipating interest in the common trust January 1, 1938, O ¿ y ,. 60 25 75 fund so as to have completed a closed (3) Net short-term capital gain of the transaction by reason of the segregation Total. 200 100 200 100 600 common trust fund for each taxable and administration of an investment of year beginning after December 31, 1937, the fund, pursuant to the provisions of (4) The excess of the gains over the (iv) The participants’ shares of the long­ subdivision (c) (7) of sectionJL7 of Regu­ term capital loss are as follows: losses recognized to the common trust lation F of the Board of Governors of fund upon sales or exchanges of capital Participants’ Shares of Long-Term Capital Loss the Federal Reserve System, as amended, assets held (i) for more than 18 months for the benefit of all the then partici­ pants in the common trust fund. Such for taxable years beginning after De­ Participant First Second Third Fourth Total cember 31, 1937, and before January 1, quarter quarter quarter quarter segregated investment shall be con­ 1942, and (ii) for more than 6 months sidered as held by, or on behalf of, the for taxable years beginning after De­ A— $25 $50 $25 $50 $150 common trust fund for the benefit cember 31,1941, and B . .... an 25 50 25 60 150 ratably of all participants in the common i i H M 25 50 75 (5) Ordinary net or taxable income 1 ) ____ 25 25 trust fund at the time of segregation, of the common trust fund for each tax­ K i -, ... 60 50 and any income or loss arising from its F ' 25 50 75 able year beginning after December 31, G— 25 60 75 administration and liquidation shall con­ 1937. stitute income or loss to the common (d) Reductions in basis. As pre­ Total. 100 200 100 200 600 trust fund apportionable among the par­ scribed in paragraph (b) of this section, ticipants for whose benefit the invest­ in computing the gain or loss upon the (4) If in the above example the com­ment was segregated. withdrawal of a participating interest mon trust fund also had short-term (b) Basis for gain or loss upon with­or portion thereof, the basis of the par­ capital losses and long-term capital drawal. The participant’s gain or loss ticipating interest or portion thereof gains, the treatment of such gains or upon withdrawal of its participating in­ withdrawn shall be reduced by such por­ losses would be similar to that accorded terest or portion thereof shall be meas­ tions of the following items as were al­ to the short-term capital gains and long­ ured by the difference between the locable to the participant with respect term capital losses in the above example. amount received upon such withdrawal to the participating interest or portion (d) The provisions of Subparts A, B, and the adjusted basis of the participat­ thereof withdrawn: C, D, and E of Part I of Subchapter J are ing interest or portion thereof with­ (1) The amount of the excess of the applicable in determining the extent to drawn plus the additions prescribed in allowable deductions of the common paragraph (c) of this section and minus trust fund over its gross income for the which each participant’s proportionate the reductions prescribed in paragraph share of the income of the common trust taxable years beginning after December (d) of this section. The amount received 31, 1935, and before January 1, 1938, fund is taxable to the participant, or to by the participant shall be the sum of the beneficiaries or the grantor of the any money plus the fair market value of and participant. property (other than money) received (2) The amount of the net short-term upon such withdrawal. The basis of the capital loss, net long-term capital loss, 5 1.584-3 Computation of common participating interest or portion thereof and ordinary net loss of the common trust fund income. The taxable income withdrawn shall be the sum of any trust fund for each taxable year begin­ of the common trust fund shall be com­ money plus the fair market value of ning after December 31, 1937. puted in the same manner and on the any property (other than money) con­ § 1.584-5 Returns of banks with re­ same basis as in the case of an individ­ tributed by the participant to the spect to common trust funds. For rules ual, except that: common trust fund to acquire the par­ applicable to filing returns of common No. 130----- 2 5004 RULES AND REGULATIONS trust funds, see section 6032 and the reg­ issues shares subject to fines, penalties, to a reserve for bad debts under section 166 forfeitures, or other withdrawal fees, it (c) shall be determined with due regard to ulations thereunder. the amount of the taxpayer's surplus or bad § 1.584-6 Net operating loss deduc­ may deduct under section 591 the total debt reserves existing at the close of De­ tion. The net operating loss deduction amount credited as dividends upon such cember 31, 1951. In the case of a taxpayer is not allowed to a common trust fund. shares, credited to a bonus account for described in the preceding sentence, the rea­ Each participant in a common trust such shares, or allocated to a series of sonable addition to a reserve for bad debts shares for the taxable year, notwith­ for any taxable year shall in no case be less fund, however, will be allowed the bene­ standing that as a customary condition than the amount determined by the tax­ fits of such deduction. In the computa­ of withdrawal: payer as the reasonable addition for such tion of such deduction, a participant in (1) Amounts invested in, and earn­ year; except that the amount determined a common trust fund shall take into ac­ by the taxpayef under this sentence shall count its pro rata share of items of in­ ings credited to, series shares must be not be greater than the lesser of— come, gain, loss, deduction, or credit of withdrawn in multiples of even shares,, (1) The amount of its taxable income for the common trust fund. The character or the taxable year, computed without regard of any such item shall be determined as (2) Such association has the right, to this section, or pursuant to by-law, contract, or other­ (2) The amount by which 12 percent of if the participant had realized such item wise, to retain or recover a portion of the total deposits or withdrawable accounts directly from the source from which re­ the total amount invested in, or credited of its depositors at the close of such year alized by the common trust fund, or in­ as earnings upon, such shares, such exceeds the sum of its surplus, undivided curred such item in the same manner as bonus account, , or series of shares, as a profits, and reserves at the beginning of the incurred by the common trust fund., fine, penalty, forfeiture, or other with­ taxable year. MUTUAL SAVINGS BANKS, ETC. drawal fee. § 1.593-1 Additions to reserve for bad § 1.591' Statutory provisions; deduc­ In any taxable year in which the right debts—(a) In general. A mutual sav­ tion for dividends paid on deposits. referred to in subparagraph (2) of this ings bank not having capital stock rep­ paragraph is exercised, there is includ­ resented by shares, a domestic building S e c . 591. Deduction for dividends paid on and loa*n association, and a cooperative deposits. In the case of mutual savings ible in the gross income of such asso­ banks, cooperative banks, and domestic ciation for such taxable year amounts bank without capital stock organized and building and loan associations, there shall be retained or recovered by the association operated for mutual purposes and with­ allowed as deductions in computing taxable pursuant to the exercise of such right. out profit may, as an alternative to a income amounts paid to, or credited to the deduction from gross income under sec­ accounts of, depositors or holders of ac­ § 1.592 Statutory provisions; deduc­ tion 166 (a) for specific debts which be­ counts as dividends on their deposits or tion for repayment of certain loans. come worthless in whole or in part, de­ withdrawable accounts, if such amounts paid S e c . 592. duct amounts credited to a reserve for or credited are withdrawable on demand sub­ Deduction for repayment of cer­ tain loans. In the case of a mutual savings bad debts in the manner and under the ject only to customary notice of intention to hank not having capital stock represented by withdraw. circumstances prescribed in this section shares, a domestic building and loan asso­ and § 1.593-2. In the case of such an § 1.591-1 Deduction for dividends ciation, or a cooperative bank without capital institution, the selection of either of the paid on deposits—(a) In general. (1) A stock organized and operated for mutual purposes and without profit, there shall be alternative methods for treating bad mutual savings bank not having capital allowed as deductions in computing taxable debts may be made by the taxpayer in stock represented by shares, a domestic income amounts paid by the taxpayer during the return for its first taxable year be­ building and loan association, and a co­ the taxable year in repayment of loans made ginning after December 31, 1951. The operative bank without capital stock before September 1, 1951, by (1) the United method selected shall be subject to the organized and operated for mutual pur­ States or any agency or instrumentality approval of the Commissioner upon ex­ poses and without profit may deduct thereof which is wholly owned by the United amination of the return. If the method from gross income amounts which dur­ States, or (2) any mutual fund established under the authority of the laws of any State. selected is approved, it must be followed ing the taxable year are paid to or in returns for subsequent years, unless credited to the accounts of depositors § 1.592-1 Repayment of certain loans permission is granted by the Commis­ or holders of accounts, as dividends on by mutual savings banks, building and sioner to change to another method. their deposits or withdrawable accounts, loan associations, and cooperative banks. Application for permission to change the if such amounts paid or credited are There is deductible, under section 592, method of treating bgfi debts shall be withdrawable on demand subject only to from the gross income of a mutual sav­ made at least 30 days prior to the close customary notice of intention to with­ ings bank not having capital stock rep­ of the taxable year for which the change draw. resented by shares, a domestic building is to be effective. (2) The deduction provided in section and loan association, or a cooperative (b) Addition to reserve. Except, as 591 is applicable to the taxable year in bank without capital stock organized and otherwise provided in § 1.593-2, the rea­ which amounts credited as dividends be­ operated for mutual purposes and with­ sonable addition to a reserve for bad come withdrawable by the depositor or out profit, amounts paid by such institu­ debts shall be any amount determined holder of account subject only to cus­ tions during the taxable year in repay­ by the taxpayer which does not exceed tomary notice of intention to withdraw. ment of loans made before September 1, the lesser of: Thus, amounts credited as dividends as 1951, by the United States or any agency (1) The amount of its taxable income of the last day of the taxable year which or instrumentality thereof which is for the taxable year, computed without are not withdrawable by depositors or wholly owned by the United States, or regard to section 593 and without regard holders of accounts until the following by any mutual fund established under to any section providing for a deduction business day are deductible under sec­ the authority of the laws of any State. the amount of which is dependent upon tion 591 in the year subsequent to the For example, amounts paid by such in­ the amount of taxable income (such as taxable year in which they were credited. stitution in repayment of loans made by section 170, relating to charitable, etc., A deduction under this section will not the Reconstruction Finance Corporation contributions and gifts), or be denied by reason of the fact that the before September 1, 1951, are deductible (2) The amount by which 12 percent amounts credited as dividends, otherwise under this section. Section 592 is not of the total deposits or withdrawable ac­ deductible under section 591, are subject applicable, however, in the case of counts of its depositors at the close of to the terms of a pledge agreement be­ amounts paid in repayment of loans such year exceeds the sum of its surplus, tween the institution and the depositor made by an agency or instrumentality undivided profits, and reserves at the or holder of account. In the case of a not wholly owned by the United States. beginning of the taxable year. building and loan association having § 1.593 Statutory provisions-; addi­ (c) Adjustments to reserve. Bad nonwithdrawable capital stock repre­ tions to reserve for bad debts. debt losses sustained during the taxable sented by shares, no deduction is allow­ year shall be charged against the bad able under this section for amounts paid S e c . 593. Additions to reserve for bad debts. debt reserve. Recoveries of debts or credited as dividends on such shares. In the case of a mutual savings bank not having capital stock represented by shares, charged against the bad debt reserve (b) Serial associations, bonus plans,a domestic building and loan association, and during a prior taxable year in which the etc. If a building and loan association a cooperative bank without capital stock or­ institution was subject to tax under this operates in whole or in part as a serial ganized and operated for mutual purposes chapter or under chapter 1 of the In­ association, maintains a bonus plan, or and without profit, the reasonable addition ternal Revenue Gode of 1939 shall be Friday, J u ly 6, 1956 FEDERAL REGISTER 5005 credited to the bad debt reserve. The cept that such term, in the case of a § 1.593-2 Additions to reserve for bad establishment of such reserve and all building and loan association« does not debts where surplus, reserves, and undi­ adjustments made thereto must be re­ include permanent nonwithdrawable vided profits equal or exceed 12 percent flected on the regular books of-account capital stock represented by shares, or of deposits or withdrawable accounts. of the institution at the close of the earnings credited thereon. Where 12 percent of the total deposits taxable year, or as soon as practicable (e) Examples. The provisions of thisor withdrawable accounts of an institu­ thereafter. Minimum amounts credited section may be illustrated by the follow­ tion at the close of the taxable year is in compliance with Federal or State stat­ ing examples: equal to or less than the sum of such utes, regulations, or supervisory orders Example (1). (1) Institution X, which institution’s surplus, undivided profits, to reserve or similar accounts, or addi­ keeps its books on the basis of the calendar and reserves at the beginning of the tax­ tional amounts credited to such reserve year, has surplus, reserves, and undivided able year, a reasonable addition to the or similar accounts and permissive under profits of $800,000 as of January 1, 1055, and reserve for bad debts as determined such statutes, regulations, or orders, total deposits or withdrawable accounts of under the general provisions of section against which charges may be made for $10,000,000 as of December 31, 1955. During 166 (c) may be allowable as a deduction the purpose of absorbing losses sustained 1955 the institution credits $30,000, as re­ quired by a Federal agency, to a Federal in­ from gross income. In making such de­ by an institution, will be deemed to have surance reserve for the sole purpose of ab­ termination, there shall be taken into been credited to the bad debt reserve. sorbing losses. Likewise, it credits $25,000, account (a) surplus or bad debt reserves (d) Definitions. When used in this as permitted by State statute, to another existing at the close of December 31, section and in § 1.593-2: reserve fund for the purpose of absorbing 1951 (i. e., the amount of surplus, undi­ (1) Institution. The term “institu­ losses. In 1955 Institution X charges $5,000 vided profits, and reserves accumulated tion” means either a mutual savings against its bad debt reserve for losses sus­ prior to January 1,1952, and in existence bank not having capital stock repre­ tained during the taxable year. at the close of December 31, 1951), and sented by shares, a domestic building and - (ii) The taxable income of Institution X for the taxable year 1955, computed without (b) changes in the surplus, undivided loan association as defined in section regard to section 593 and without regard to profits, and reserves of the institution 7701 (a) (19), or a cooperative bank any section providing for a deduction the from December 31, 1951, until the be­ without capital stock organized and op­ amount of which is dependent upon the ginning of the taxable year. A deduction erated for mutual purposes and without amount of taxable income, is $200,000. for an addition to the reserve for bad profit. (iii) Upon the basis of the facts as stated debts pursuant to this section will be au­ (2) Surplus, undivided profits, and re­ in subdivision (i) above, the amount by thorized only in those cases where the serves. (i) The phrase “surplus, undi­ which 12 percent of the total deposits or institution proves to the satisfaction of vided profits, and reserves” means the withdrawable accounts of Institution X at the close of taxable year 1955 exceeds the the Commissioner that the bad debt ex­ amount by which the total assets of an sum of such institution’s surplus, undivided perience of the institution warrants an institution exceed the amount of the profits, and reserves at the beginning of the addition to the reserve for bad debts in total liabilities of such an institution. taxable year is $400,000 (12% of $10,000,000, excess of that provided in § 1.593-1 (b) . (ii) For this purpose the term “total minus $800,000). For definitions, see § 1.593-1 (d). assets” means the sum of money, plus (iv) Institution X, therefore, may deduct, the aggregate of the adjusted basis of for the taxable year 1955, as an addition to § 1.594 Statutory provisions; alterna­ the property other than money, held by a reserve for bad debts, any amount it may tive tax for mutual savings banks con­ an institution. Such adjusted basis for determine that does not exceed the lesser ducting life insurance business. any asset is its adjusted basis for deter­ of the amounts determined in subdivision Sec. 594. Alternative tax for mutual sav­ (ii) or (iii) above. That amount is $200,000 ings banks conducting life insurance busi­ mining gain upon sale or exchange for (as determined in subdivision (ii) above). Federal income tax purposes. (See sec­ ness—(a) Alternative tax. In the case of Since under paragraph (c) of this section, a mutual savings bank not having capital tions 1011 through 1022, and the regula­ the $30,000 credited to the reserve as re­ stock represented by shares, authorized un­ tions thereunder. For special rules with quired by the Federal agency and the $25,000 der State law to engage in the business of respect to adjustments to basis for prior credited to the reserve as permitted by the issuing life insurance contracts, and which taxable years during which the institu­ State statute are regarded as amounts conducts a life insurance business in a sepa­ tion was exempt from tax, see section credited to a reserve for bad debts account, rate department the accounts of which are 1016 (a) (3) and the regulations there­ Institution X can credit an additional maintained separately from the other ac­ $145,000 ($200,000 minus $55,000) to a gen­ counts of the mutual savings bank, there under.) The determination of the total eral reserve for bad debts account at any assets of any taxpayer shall conform to shall be imposed in lieu of the taxes im­ time during the taxable year. posed by section 11 or section 1201 (a), a the method of accounting employed by (v) The loss of $5,000 charged to the bad tax consisting of the sum of the partial taxes such taxpayer in determining taxable debt reserve during the taxable year* does determined under paragraphs (1) and (2): income and to the rules applicable in not affect the amount of the addition to (1) A partial tax computed on the taxable determining its earnings and profits. the bad debt reserve provided for in para­ income determined without regard to any (iii) The term “total liabilities” means graph (b) of this section. It is of sig­ items of gross income or deductions properly all liabilities of the taxpayer, which are nificance only in determining the surplus, allocable to the business of the life insurance fixed and determined, absolute and not undivided profits, and reserves of Institution department, at the rates and in the manner X as of January 1, 1956. as if this section had not been enacted; and contingent, and includes those items Example (2). The taxable income of In­ (2) A partial tax computed on the income which constitute liabilities in the sense stitution Y for the taxable year 1955, com­ of the life insurance department determined of debts or obligations. The total de­ puted without regard to the deduction under without regard to any items of gross income posits or withdrawable accounts, as de­ section 593 and without regard to any sec­ or deductions not properly allocable to such fined in subparagraph (3) of this para­ tion providing for a deduction the amount department, at the rates and in the manner graph, shall be considered a liability. of which is dependent upon the amount of provided in subchapter L (sec. 801 and fol­ In the case of a building and loan asso­ taxable income, is determined to be $250,000. lowing) with respect to life insurance The amount by which 12 percent of the to­ companies. ciation having permanent nonwithdraw- tal deposits or withdrawable accounts of In­ (b) Limitations of section. Subsection able capital stock represented by shares, stitution Y at the close of the taxable year (a) shall apply only if the life insurance. the paid-in amount of such stock shall exceeds the sum of such institution’s sur­ department would, if it were treated as a also be considered a liability. Reserves plus, undivided profits, and reserves at the separate corporation, qualify as a life insur­ -for contingencies and other reserves, beginning of the taxable year is $500,000. ance company under section 801. Institution Y credits $250,000 to its bad debt however, which are mere appropriations reserve in 1955. In 1957, it is determined [Sec. 594 as amended by sec. 5 (3), Life In­ of surplus, are not liabilities. surance Company Tax Act for 1955} (3) Total deposits or ivithdrawable ac­ that the correct taxable income of Institu­ tion Y for 1955, computed without regard to § 1.594-1 Mutual savings banks con­ counts. The phrase “total deposits or any deduction under section 593 and without withdrawable accounts” means the ag­ ducting life insurance business—(a) regard to any section providing for a deduc­ Scope jof application. Section 594 gregate of (i) amounts placed with an tion the amount of which is dependent upon institution for deposit or investment and the amount of taxable income, is $275,000 applies to the case of a mutual savings (ii) earnings outstanding on the books of and not $250,000. Assuming that Institution bank not having capital stock repre­ account of the institution at the close Y credits the additional $25,000 to its bad sented by shares which conducts a life of the taxable year which have been debt reserve, $275,000 is allowable as a deduc­ insurance business, if: credited as dividends upon such accounts tion from gross income for such institution (1) The conduct of the life insurance prior to the close of the taxable year, ex­ for the taxable year 1955. business is authorized under State law, 5006 RULES AND REGULATIONS (2) The life insurance business is car­ has been devoted by it during the tax­ lations under chapters 3 and 4 of the ried on in a separate department of the able year to the acquisition of readily Internal Revenue Code of 1954 was pub­ bank, ^ marketable assets other than bank stock. lished in the F ederal R egister (21 F. R. (3) The books of account of the life (3) Upon certification by the Board583). After consideration of all such insurance business are maintained sep­ of Governors of the Federal Reserve relevant matter as was presented by arately from other departments of the System to the Commissioner that such interested persons regarding the rules bank, and an amount of the earnings or profits has proposed, the following regulations are (4) The life insurance department of been so devoted by such affiliate during hereby adopted, the regulations under the bank would, if it were treated as a the taxable year. chapter 3 being effective with respect to separate corporation, qualify as a life payments made after December 31,1954: insurance company under section 801. No deduction is allowable under section (b) Computation of tax. In the case601 for the amount of readily marketable W ith h o l d in g op T ax o n Nonresident Aliens assets in excess of what is required by and F oreign Corporations and T ax-F ree of a mutual savings bank conducting a section 5144 of the Revised Statutes (12 Covenant B onds life insurance business to which section U. S. C. 61) to be acquired by such 594 is applicable, the tax upon such bank affiliate, or in excess of the taxable in­ NONRESIDENT ALIENS AND FOREIGN consists of the sum of the following: CORPORATIONS come for the taxable year computed Sec. (1) A partial tax computed under sec­ without regard to the special deductions 1.1441 Statutory provisions; withholding tion 11 upon the taxable income of the for corporations provided in Sections of tax on nonresident aliens. bank determined without regard to any 241-247, inclusive. Nor may the aggre­ 1.1441- 1 Requirement for withholding of items of income or deduction properly gate of the deductions allowable under tax on nonresident aliens and allocable to the life insurance depart­ section 601 and the credits allowable foreign corporations. ment, and under the corresponding provision of 1.1441- 2 Income subject to withholding. (2) A partial tax computed on the in­ 1.1441- 3 Exceptions and rules of special ap­ any prior income tax law for all taxable plication. come (or, in the case of taxable years years exceed the amount required to be 1.1441- 4 Exemptions from withholding. beginning before January 1, 1955, the devoted under such section 5144 to the 1.1441- 5 Claiming United States citizenship taxable income (as defined in section acquisition of readily marketable assets or residence. 803)) of the life insurance department other than bank stock. I.T442 Statutory provisions; withholding determined without regard to any items (b) Every taxpayer claiming a deduc­ of tax on foreign corporations. of income or deduction not properly al­ tion provided for in section 601 shall 1.1442- 1 Withholding of tax on foreign cor­ locable to such department, at the rates attach to its return a supplementary porations. and in the manner provided in subchap­ 1.1443 Statutory provisions; foreign tax- statement setting forth all the facts and exempt organizations. ter L (section 801 and following) with information upon which the claim is 1.1443- 1 Rents paid to foreign tax-exempt respect to life insurance companies. predicated, including such facts and in­ organizations. BANK AFFILIATES formation as the Board of Governors of the Federal Reserve System may pre­ TAX-FREE COVENANT BONDS § 1.601’ Statutory provisions; special scribe as necessary to enable it, upon 1.1451 Statutory provisions; tax-free cove­ deduction for bank affiliates. the request of the Commissioner subse­ nant bonds. S ec. 601. Special deduction for bank affili­ quent to the filing of the return, to cer­ 1.1451- 1 Tax-free covenant bonds issued be­ ates. In the case of a holding company tify to the Commissioner the amount of fore January 1,1934. affiliate (as defined in section 2 of the Bank­ earnings or profits devoted to the acqui­ 1.1451- 2 Exemptions from withholding un­ ing Act of 1933; 12 U. S. C. 221a (c )), there der section 1451. shall be allowed as a deduction, for purposes sition of such readily marketable assets. of section 535 (b) (8) (relating to the com­ A certified copy of such supplementary APPLICATION OF WITHHOLDING PROVISIONS statement shall be forwarded by the tax­ putation of accumulated taxable income) 1.1461 Statutory provisions; return and and section 545 (b) (6) relating to the com­ payer to the Board of Governors at the payment of withheld tax. putation of undistributed personal holding time of the filing of the return. The 1.1461- 1Ownership certificates for bond in­ company income), the amount of the earn­ holding company affiliate shall also terest. ings and profits which the Board of Gover­ furnish the Board of Governors such 1.1461- 2 Return and payment of tax with­ nors of the Federal Reserve System Certifies further information as the Board shall held. to the Secretary or to his delegate has been 1.1462 Statutory provisions; withheld tax devoted by such affiliate during the taxable require. For the requirements with re­ spect to the amount of such readily as credit to recipient of income. year to the acquisition of readily marketable 1.1462- 1Withheld tax as credit to recipient assets other than bank stock in compliance marketable assets which must be ac­ of income. with section 5144 of the Revised Statutes (12 quired and maintained by a holding 1.1463 Statutory provisions; tax paid by U. S. C. 61). The amount of the deduction company affiliate to which a voting per­ recipient of income. under this section for any taxable year shall mit has been granted, see section 5144 1.1463- 1Tax paid by recipient of income. not exceed the taxable income for such year (b) and (c) of the Revised Statutes (12 1.1464 Statutory provisions; refunds and computed without regard to the special de­ U. S. C. 61) . credits with respect to withheld ductions for corporations provided in part tax. VIII (except section 248) of subchapter B . [seal] O. Gordon D elk, 1.1464- 1 Refunds and credits. (section 241 and following, relating to the Acting Commissioner 1.1465 Statutory provisions; definition of deduction for dividends received by corpora­ of Internal Revenue. withholding agent. tions, etc.). The aggregate of the deduc­ 1.1465- 1General provisions relating to tions' allowable under this section and the Approved: June 29,1956. credits allowable under the corresponding withholding agents. provision of any prior income tax law for D an T hroop Smith, R ules Applicable to R ecovery o f E xcessive all taxable years shall not exceed the amount Special Assistant to the Secretary P rofits o n G overnment Contracts required to be devoted under such section in Charge of Tax Policy. 5144 to such purposes. RECOVERY OF EXCESSIVE PROFITS ON GOVERNMENT [F. R. Doc. 56-5351; Filed, July 5, 1956; CONTRACTS § 1.601-1 Special deduction for bank 8:50 a. m.] affiliates, (a) The special deduction de­ 1.1471 Statutory provisions; recovery of scribed in section 601 is allowed: excessive profits on government (1) To a holding company affiliate of contracts. [T. D. 6187] 1.1471-1 Recovery of excessive profits on a bank, as defined in section 2 of the government contracts. Banking Act of 1933 (12 U. S. C. 221a), P art 1—I ncome Tax; T axable Y ears which holding company affiliate holds, B eginning After D ecember 31,1953 MITIGATION OF EFFECT OF RENEGOTIATION OF at the end of the taxable year, a general GOVERNMENT CONTRACTS voting permit granted by the Board of withholding of tax on nonresident ALIENS AND FOREIGN CORPORATIONS AND 1.1481 Statutory provisions; mitigation of Governors of the Federal Reserve effect of renegotiation of govern­ System. TAX-FREE COVENANT BONDS; RECOVERY OF ment contracts. (2) In the amount of the earnings or EXCESSIVE PROFITS ON GOVERNMENT CONTRACTS A u t h o r i t y : §§ 1.1441 to 1.1481 Issued un­ profits of such holding company affiliate der sec. 7805, 68 Stat. 917; 26 U. S. C. 7805. which, in compliance with section 5144 On January 26, 1956, notice of pro­ Interpret or apply secs. 1441, 1443, 6041, 68A of the Revised Statutes (12 U. S. C. 61), posed rule making regarding the regu­ Stat. 357, 398, 745; 26 U. S. C. 1441,1443, 6041. Friday, J u ly 6, 1956 FEDERAL REGISTER 5007

Withholding of T ax on N onresident if the amount of such gain is not known to share of the fixed or déterminable an­ Aliens and F oreign Corporations and the withholding agent, be such amount, not nual or periodical income of an estate exceeding 30 percent of the proceeds from Tax- free Covenant Bonds such sale or exchange, as may be necessary or trust from sources within the United to assure that the tax deducted and with­ States which is required to be distributed nonresident aliens and foreign currently, or which has been paid or corporations held shall not be less than 30 percent of such gain. credited during the taxable year, to a § 1.1441 Statutory provisions; with- (d) Alien resident of Puerto Rico. Fornonresident alien beneficiary of such es­ holding of tax on nonresident aliens. purposes of this section, the term “nonresi­ tate or trust constitutes fixed or deter­ dent alien individual’’ includes an alien res­ Sec. 1441. Withholding of tax on nonresi­ minable annual or periodical income. dent aliens—(a) General rule. Except as ident of Puerto Rico. Such items as taxes, interest on mort­ otherwise provided in subsection (c), all per­ § 1.1441-1 Requirement for withhold­ gages, or premiums on insurance paid sons, in whatever capacity acting (including ing of tax on nonresident aliens and to or for the account of a nonresident lessees or mortgagors of real or personal foreign corporations. Except as other­ alien landlord by a tenant, pursuant to property, fiduciaries, employers, and all of­ the terms of the lease, constitute fixed or ficers and employees of the United States) wise provided in §§ 1.1441-3 and 1.1441-4, having the control, receipt, custody, dis­ withholding of a tax of 30 percent is re­ determinable annual or periodical in­ posal, or payment of any of the items of in­ quired in the case of the items of income come. come specified in subsection (b) (to the specified in § 1.1441-2 (to the extent that (3) Income derived from the sale in extent that any of such items constitutes such items constitute gross income from the United States of property, whether gross income from sources within the United sources within the United States) paid real or personal, is not fixed or deter­ States), of any nonresident alien individual, to a nonresident alien individual, a non­ minable annual or periodical income. or of any partnership not engaged in trade or However, the consideration received business within the United States and com­ resident partnership composed in whole posed in whole or in part of nonresident or in part of nonresident alien individ­ from the transfer of property is fixed or aliens, shall (except in the cases provided for uals, or a nonresident foreign corpora­ determinable annual or periodical in­ in section 1451 and except as otherwise pro­ tion. The rate of 30 percent shall be come if for purposes of the income tax vided in regulations prescribed by the Secre­ reduced as may be provided by treaty the consideration is treated as rentals or tary or his delegate under section 874) de­ with any country. See section 894, re­ royalties and not as the proceeds of a duct and withhold from such items a tax lating to income exempt under treaty. sale of property. equal to 30 percent thereof. (b) Amounts considered to be gains (b) Income items. The items of income For purposes of this section, the term referred to in subsection (a) are interest “nonresident alien individual” includes from the sale or exchange of capital (except interest on deposits with persons an alien resident of Puerto Rico. assets. Withholding is also required on carrying on the banking business paid" to the gross amount of the items described persons not engaged in business in the § 1.1441-2 Income subject to with- in section 402 (a) (2), relating to treat­ United States), dividends, rent, salaries, holding—(a) Fixed or determinable an­ ment of total distributions from certain wages, premiums, annuities, compensations, nual or periodical income. (1) The gross employees’ trusts; section 631 (b) and remunerations, emoluments, or other fixed or amount of fixed or determinable annual (c), relating to treatment of gain on dis­ determinable annual or periodical gains, or periodical income is subject to with­ posal of timber or coal with a retained profits, and income, and amounts described holding. Section 1441 specifically in­ in section 402 (a) (2), section 631 (b) and economic interest; and section 1235, re­ (c), and section 1235, which are considered cludes in such income interest (except lating to treatment of gain on sale or to be gains from the sale or exchange of interest on deposits with persons carry­ exchange of patents, which are consid­ capital assets. ing on the banking business paid to per­ ered to be gains from the sale or ex­ (c) Exceptions—(1) Dividends of foreign sons not engaged in business in the change of capital assets. corporations.. No deduction or withholding United States), dividends, rent, salaries, under subsection (a) shall be required in the wages, premiums, annuities, compensa­ §1.1441-3 Exceptions and rules of case of dividends paid by a foreign corpora-^ tions, remunerations, and emoluments; special application— (a) Income from tion unless (A) such corporation is engaged but other kinds of income are included, sources without* the United States. To in trade or business within the United States, as, for instance, royalties. The term the extent that items of income consti­ and (B) more than 85 percent of the gross “fixed or determinable annual or pe­ tute gross income from sources without income of such corporation for the 3-year the United States, they are not subject to period ending with the close of its taxable riodical” income is merely descriptive of year preceding the declaration of such divi­ the character of a class of income. If an withholding under § 1.1441-1. For rules dends (or for such part of such period as item of income falls within the class of governing the determination of the the corporation has been in existence) was income contemplated by the statute, it is sources of income, see sections 861 to 864, derived from sources within the United immaterial whether payment of that inclusive, and the regulations there­ States as determined under part I of sub­ item is made in a series of repeated pay­ under. chapter N of chapter 1. ments or in a single lump sum. Thus, (b) Corporate distributions—(1) Non- (2) Owner unknown. The Secretary or $5,000 in royalty income would come taxable portion. The tax shall be with­ his delegate may authorize the tax under held at the source under § 1.1441-1 on subsection (a) to be deducted and withheld within the meaning of the term, whether from the interest upon any securities the paid in 10 payments of $500 each or in the gross amount of any distribution owners of which are not known to the with­ one payment of $5,000. made by a corporation other than— holding agent. (2) Income is fixed when it is to be (1) A nontaxable distribution payable (3) Bonds with extended maturity dates. paid in amounts definitely predeter­ in stock or stock rights, and The deduction and withholding in the case mined. Income is determinable when­ (ii) A distribution which is treated as of interest on bonds, mortgages, or deeds of ever there is a basis of calculation by a distribution in part or full payment in trust or other similar obligations of a corpo­ exchange for stock. ration, within subsections (a), (b), and (c) which the amount to be paid may be -of section 1451 were it not for the fact that ascertained. The income need not be This rule shall apply without regard to the maturity date of such obligations has paid annually if it is paid periodically; any claim that all or a portion of the been extended on or after January 1, 1934, that is to say, from time to time, whether distribution is not taxable under section and the liability assumed by the debtor ex­ or not at regular intervals. The fact ceeds 27% percent of the interest, shall not 871 or 881. The tax shall be withheld on exceed the rate of 27% percent per annum. that a payment is not made annually the gross amount of the distribution even (4) Compensation of certain aliens. Un­ or periodically does not, however, neces­ though the payee may be entitled to the der regulations prescribed by the Secretary sarily prevent its being fixed or de­ benefits of sectiçn 34, relating to the or his delegate, there may be exempted from terminable annual or periodical income. credit for dividends received by individ­ deduction and withholding under subsection That the length of time during which uals, or section 116, relating to partial (a) the compensation for personal services the payments are to be made may be exclusion of dividends received by in­ of nonresident alien individuals who enter increased or diminished in accordance dividuals. Appropriate adjustment, if and leave the United States at frequent with someone’s will or with the hap­ any, will be made upon the payee’s filing intervals. pening of an event does not make the ' (5) Special items. In the case of amounts of a claim for refund, together with described in section 402 (a) (2), section 631 payments any the less determinable or appropriate supporting evidence, in ac* (b) and (c), and section 1235, which are periodical. A salesman working by the cordance with paragraph (h) of this considered to be gains from the sale or month for a commission on sales which section. exchange of capital assets, the amount re­ is paid or credited monthly receives de­ (2) Dividends paid by a foreign quired to be deducted and withheld shall, terminable periodical income. The corporation. No withholding under 5008 RULES AND REGULATIONS § 1.1441-1 is required in the case of divi­ corporation, shall deduct and withhold on or after January 1, 1934. See para­ dends paid by a foreign corporation un­ such taxes under § 1.1441-1 as would be graph (c) of § 1.1451-1. less (i) the corporation is engaged in required to be withheld by the assignor (d) Amounts considered to be gains trade or business within the United had no such sale or transfer been made. from the sale or exchange of capital as­ States, and (ii) more than 85 p*ercent (3) Defaulted interest coupons. The sets. (1) If, in the case of the amounts of the gross income of the corporation tax shall be withheld at the source under enum erated in paragraph (b) of for the 3-year period ending with the § 1.1441-1 on the gross amount of inter­ §1.1441-2 which are considered to be close of its taxable year preceding the est without regard to whether or not the gains from the sale or exchange of capi­ declaration of the dividends (or for such payment constitutes a return of capital tal assets, the withholding agent does part of such period as the corporation or the payment of income within the not know the amount of recognized gain, has been in existence) was derived from meaning of section 61. Thus, for ex­ he is required to deduct and withhold sources within the United States as de­ ample, the tax shall be withheld in such amount under § 1.1441-1 as may termined under the provisions of sec­ accordance with § 1.1441-1 from de­ be necessary to assure that the tax with­ tions 861-864, inclusive, and the regula­ faulted interest payments upon bonds held will not be less than 30 percent of tions thereunder. which were purchased flat at quotations the recognized gain. For this purpose (3) Dividends paid "by a China Trade representing the price of both the bonds the recognized gain shall be determined Act corporation. Withholding is re­ and the defaulted matured interest cou­ without regard to the deduction allowed quired under § 1.1441—1 on dividends pons. Appropriate adjustment, if any, by section 1202 in respect of capital gains. paid by a corporation organized under will be made upon the payee’s filing of a The amount so withheld shall not exceed the China Trade Act of 1922 (15 U. S. C., claim for refund, together with appro­ 30 percent of the gross proceeds from c. 4) if the dividends are treated as in­ priate supporting evidence, in accord­ the transaction giving rise to the rec­ come from sources within the United ance with paragraph (h) of this section. ognized gain, except that the gross pro­ States u«ider sections 861-864, inclusive, (4) Unknown owner. Withholding is ceeds may be determined by excluding and are distributed to— required under § 1.1441-1 in the case of the net unrealized appreciation described (1) A nonresident alien other than a interest upon all bonds or securities the in section 402 (a) (2). Appropriate ad­ resident of Formosa or Hong Kong at owners of which are not known to the justment, if any, will be made upon the the time of the distribution, or withholding agent unless such bonds or payee’s filing of a claim for refund, to­ securities were issued by a corporation gether with appropriate supporting evi­ (ii) A nonresident partnership com­ before January 1, 1934, contain a tax- posed in whole or in part of nonresident dence, in accordance with paragraph (h). free covenant, and do not have a matu­ of this section. aliens (other than a partnership resident rity date which was extended on or after in Formosa or Hong Kong), or that date. For withholding under sec­ (2) The withholding agent may rely (iii) A nonresident foreign corpora­ tion 1451 in the case of unknown owners, upon the written statement of the per­ tion (other than'a corporation resident see paragraph (a) (2) of § 1.1451-1. son entitled to the income described in in Formosa or Hong Kong). (5) Tax-free covenant bonds—(i) Is­ this paragraph as to the amount of (4) Dividends paid to shareholder sued on or after January 1, 1934. With­ gain recognized on the transaction in­ whose status is not definite. When a holding is required under § 1,1441-1 in volved. This statement shall show the payer corporation or any other person, the case of interest upon bonds or other computation of the gain and shall be including a nominee, having the con­ corporate obligations issued on or after furnished to the withholding agent in trol, receipt, custody, disposal, or pay­ January 1, 1934, and containing a tax- duplicate. The duplicate copy of the ment of dividends has no definite knowl­ free covenant. statement shall be forwarded with a let­ edge of the status of a shareholder, the (ii) Issued before January 1, 1934. ter of transmittal to the District Director tax shall be withheld under § 1.1441-1 if Withholding is not required under §1.- of Internal Revenue, Baltimore 2, Mary­ the shareholder’s address is outside the 1441-1 in the case of interest upon bonds land; except that on and after January United States. If the shareholder’» ad­ or other corporate obligations issued be­ 1, 1957, such copy shall be forwarded dress is within the United States, it may fore January 1, 1934, containing a tax- to the Director of International Opera­ be assumed for the purpose of withhold­ free covenant, and not having a maturity tions,, Internal Revenue Service, Wash­ ing on dividends that the shareholder date which was extended on or after that ington 25, D. C. is a citizen or resident of the United date. A domestic or resident fiduciary is (e) Personal exemption. (1) The States. Unless the name and style of required, however, to withhold tax under taxation of nonresident alien individuals the shareholder are such as to indicate § 1.1441-1 in the case of so much of such is provided for in sections 871 to 877, clearly that he is a nonresident alien, interest as is prdperly allocable under inclusive. Section 874 (a) makes the an address in care of another person in section 652 or 662 to a nonresident alien filing of a return a prerequisite to the the United States does not of itself war­ beneficiary. See paragraph (f) of this allowance of deductions, including de­ rant treating the shareholder as a non­ section and of § 1.1451-1. For general ductions of personal exemptions. Except resident alien for such purpose. If a rules respecting the withholding of tax in the circumstances described in sub- shareholder changes his address from a under section 1451 in the case of such in­ paragraph (2) of this paragraph, per­ place without the United States to a terest, see § 1.1451-1. sonal exemptions do not serve to reduce place within the United States, the tax (iii) Extended maturity date. W ith; the amount of tax to be withheld under shall be withheld on dividends unless holding is required under § 1.1441-1 in § 1.1441-1. proof is furnished showing that he is- the case of interest upon bonds or other (2) In the determination of the tax a citizen or resident of the United corporate obligations issued before to be withheld at the source under States. For general provisions for January 1, 1934, and containing a tax- § 1.1441-1 from remuneration paid for claiming United States citizenship or free covenant, if the maturity date of labor or personal services performed residence, see § 1.1441-5. the bonds or obligations has been ex­ within the United States by a nonresi­ (c) Interest—(1) Government obli­tended on or after that date. See para­ dent alien, the benefit of the deduction gations. Withholding is required under graph (c) of § 1.1451-1. for one personal exemption provided in § 1.1441-1 in the case of interest paid on (iv) Special rate of 27% percent. The section 151 shall be allowed, prorated obligations issued on or after March 1, rate of tax to be withheld at the source upon a daily basis for the period of em? 1941, by the United States or any agency under § 1.1441-1 shall not exceed 21% ployment during any portion of which or instrumentality thereof. See section percent in the case of interest on bonds, labor or personal services are performed 103 and the regulations thereunder, re­ mortgages, or deeds of trust, or other within the United States by the alien. lating to the taxation of such interest, similar obligations of a corporation if— The proration is on the basis of $1.70 and § 1.1461-1, relating to ownership (a) The liability assumed by the per day. Thus, if A, a nonresident alien certificates. debtor exceeds 211% percent of the in­ seaman employed by X Shipping Cor­ (2) Assumed obligations. If, in con­ terest, and poration, is paid in 1955 upon the ter­ nection with the sale of a corporation’s (b) The interest would be subject to mination of a voyage covering 100 days property, payment of the bonds or other withholding under the provisions of sub­ and A performs personal services within obligations of the corporation is as­ sections (a), (b), and (c) of section 1451 the United States during, or incident to, sumed by the assignee, the assignee, except for the fact that the maturity the voyage, the amount of $170 will be whether an individual, partnership, or date of the obligations has been extended allocated as the portion of the deduction Friday, J u ly 6, 1956 FEDERAL REGISTER 5009 to be allowed against the remuneration not be subject to withholding of tax income as proof that such individual is a for personal services performed within under § 1.1441-1 if— citizen or resident of the United States. the United States during that voyage; (1) The nonresident alien is a resi­ This statement shall be furnished to the and withholding at 30 percent shall be dent of Canada or Mexico, or withholding agent in duplicate. An applied against the balance, if any, of (ii) The nonresident alien is engaged alien may claim residence in the United the remuneration. If, for example, the in agricultural labor as defined in section States by filing Form 1078 with the with­ total remuneration paid to A for that 3121 (g) and the regulations thereunder. holding agent in duplicate in lieu of the voyage is $2,000, of which the amount of (2) Withholding of tax under section above statement. $800 is allocable to sources within the. 3402. For collection of the income tax (b) Partnerships and corporations. United States, a tax in the amount of at source under section 3402 upon remu­ For purposes of chapter 3 a written $189 is required to be withheld under neration paid for services performed by statement from a partnership or corpo­ § 1.1441-1. As to what constitutes re­ a nonresident alien individual who is a ration claiming residence in the United muneration for labor or personal serv­ resident of Canada or Mexico and who States may be relied upon by the payer ices performed within the United States, enters and leaves the United States at of the income as proof that such partner­ see section 86.1 (a) (3) and the regula­ frequent intervals, see section 3401 (a) ship or corporation is a resident of the tions thereunder. (7) and the regulations thereunder. United States. This statement shall be (f) Fiduciaries. Resident or domes­ (3) Proration of personal exemption. furnished to the withholding agent in tic fiduciaries are required to withhold For provisions allowing the benefit of duplicate. It shall contain the address the tax at source under § 1.1441-1 on the deduction for the personal exemp­ of the taxpayer’s office or place of busi­ all items of income specified in § 1.1441-2 tion on a prorated basis, see paragraph ness in the United States and shall be of nonresident alien beneficiaries, to the (e) of § 1.1441-3. signed by a member of the partnership extent that such items constitute gross (c) Dividends paid by China Trade or by ah officer of the corporation. The income from sources within the United Act corporations. Withholding is not official title of the corporate officer shall States. Such income paid to a nonresi­ required under § 1.1441-1 upon dividends also be given. dent alien fiduciary is subject to with­ distributed by a corporation organized (c) Manner of filing statement or holding under § 1.1441-1 even though under the China Trade Act of 1922 (15 form. (1) The statement of citizenship the beneficiaries of the estate or trust U. S. C., c. 4) to or for the benefit of a or residence, or Form 1078 in the case are citizens or residents of the United resident of Formosa or Hong Kong and of residence, shall be filed with the with­ States. which are exempt from taxation by sec­ holding agent for each successive three- (g) Trust income taxable to grantor. tion 943. calendar-year period during which the The income of a trust created by a non­ (d) Inhabitants of Virgin Islands— income is paid in respect of which the resident alien individual and taxable (1) Allowance of exemption. No with­ statement or form is furnished. The to the grantor under the provisions of holding is required under .§ 1.1441-1 upon statement or form shall be filed with the subpart E of part I of subchapter J is any item of income paid to any person withholding agent not later than 20 days subject to withholding under § 1.1441-1, who at the time of payment reasonably preceding the date of the first payment even though the fiduciary or beneficiaries expects to satisfy his income tax obliga­ within the three-calendar-year period of the trust are citizens or residents of tions with respect- to that item under for which the statement or form is fur­ the United States and regardless of section 28 (a) of the Revised Organic Act nished, or, if that is not possible because whether the beneficiaries are exempt of the Virgin Islands. That section pro­ of special circumstances, as soon as pos­ from income tax. vides that all persons whose permanent sible after such first payment. (h) Claims for refund. Notwith­ residence is in the Virgin Islands “shall (2) Once a statement or form has been standing § 301.6402-2 of this chapter, any satisfy their income tax obligations un­ filed in respect of any three-calendar- claim for refund referred to in para­ der applicable taxing statutes of the year period, no additional statement or graphs (b), (o), and (d) of this sec­ United States by paying their tax on form is required to be filed in respect tion which is filed on and after January income derived from all sources both thereto unless the Commissioner of In­ 1, 1957, shall be filed with the Director within and outside the Virgin Islands ternal Revenue notifies the withholding of International Operations, Internal into the Treasury of the Virgin Islands.” agent that an additional statement or Revenue Service, Washington 25, D. C. For the purpose of this paragraph, the form shall be filed by the taxpayer. If, For special rules permitting the use of term “person” shall include an individ­ after filing a statement or form, the tax­ the income tax return as a claim for re­ ual, partnership, and corporation. payer ceases to be a citizen or resident fund, see § 301.6402-3 of this chapter. (2) Claiming exemption. To avoid of the United States, he shall promptly (i) Rents paid to foreign tax-exempt withholding of tax at source under notify the withholding agent. organizations. For the rule for with­ § 1.1441-1 the payee of the income shall (3) Upon the expiration of any three- holding on rents paid to foreign tax- notify the withholding agent by letter in calendar-year period, the statement or exempt organizations, see § 1.1443-1. duplicate that he expects to satisfy his form filed in respect of that period may income tax obligations under section 28 not be relied upon by the payer of the § 1.1441-4 Exemptions from with­ (a) of the Revised Organic Act of the income as proof of citizenship or resi­ holding—(a) Interest—(1) Interest on Virgin Islands with respect to all in­ dence. bank deposits. Interest on deposits with come to be paid to him by the withhold­ (d) Disposition of statement and persons carrying on the banking busi­ ing agent during the current calendar form. The duplicate copy of each state­ ness paid to persons not engaged in busi­ year. This letter of notification shall ment and form filed pursuant to this ness in the United States is not subject constitute authorization to the payer of section shall be forwarded with a letter to withholding under § 1.1441-1. the income to pay income to the payee of transmittal to the Director of Inter­ (2) Sale of bonds between interestduring that year without deduction of national Operations* Internal Revenue dates. The tax is not required to be the tax at source under § 1.1441-1. Service, Washington 25, D. C. withheld under § 1.1441-1 on accrued (3) Disposition of letter. The dupli­ (e) Definitions. As to who are non­ interest paid by the buyer in connection cate copy of each letter of notification resident alien individuals, see sections with the sale of bonds between interest shall be forwarded with a letter of trans­ 871, 7701, and the regulations there­ dates, even though the interest is subject mittal to the District Director of Internal under. As to what partnerships and to tax under section 871 or 881. The Revenue, Baltimore 2, Maryland; except corporations are deemed to be nonresi­ exemption from withholding granted by that on and after January 1, 1957, such dent, see sections 881, 882, 7701, and the this subparagraph is not a determina­ copy shall be forwarded to the Director regulations thereunder. tion that the accrued interest is not fixed of International Operations, Internal (f) Effective date. This section shall or determinable annual or periodical Revenue Service, Washington 25, D. C. apply with respect to payments made income. after December 31,1956. The provisions (b) Compensation for personal serv­ § 1.1441-5 Claiming United States citizenship or residence—(a) Individu­ of §§ 39.143-3 (a) and 39.144-2 of Regu­ ices—(l) Exemption under section 1441. lations 118 corresponding to the pro­ The salary or other compensation for als. For purposes of chapter 3 an indi­ personal services of a nonresident alien vidual’s written statement that he is a visions of this section, which were made individual who enters and leaves the citizen or resident of the United States applicable to chapter 3 of the 1954 Code United States at frequent intervals shall may be relied upon by the payer of the by Treasury Decision 6091, 19 F. R. 5167, « 5010 RULES AND REGULATIONS shall be deemed to apply under such (2) Any partnership not engaged in trade obligations issued before January 1,1934, chapter with respect to all payments or business within the United States and and containing a tax-free covenant if composed in whole or in part of nonresident made after December 31,1954, and before aliens, and the interest is not to be treated as in­ January 1,1957. (3) A foreign corporation not engaged in come from sources within the United § 1.1442 Statutory provisions; with­ trade or business within the United States. States and the payments are made to a holding of tax on foreign corporations. (c) Owner unknown. If the owners of nonresident alien, a partnership com­ such obligations are not known to the with­ posed wholly of nonresident aliens, or a S ec. 1442. Withholding of tax on foreign holding agent, the Secretary or his delegate nonresident foreign corporation. corporations. In - the casé of foreign cor­ may authorize such deduction and withhold­ (6) Tax treaties. The rates of tax to porations subject to taxation under this sub­ ing to be at the rate of 2 percent, or, if the title not engaged in trade or business within liability assumed by the obligor does not be withheld in accordance with this par­ the United States, there shall be deducted exceed 2 percent of the Interest, then at the agraph shall be reduced as may be pro­ and withheld at the source in the same man­ rate of 30 percent. vided by treaty with any country. See ner and on the same items of income as is (d) Benefit of personal exemptions. De­ section 894, relating to income exempt provided in section 1441 or section 1451 a tax duction and withholding under this section under treaty. equal to 30 percent thereof; except that, in shall not be required in the case of a citizen (b) Date of issue. The withholding the case of interest described in section 1451 or resident entitled to receive such interest, provisions of section 1451 are applicable (relating to tax-free covenant bonds), the if he files with the withholding agent on or deduction and withholding shall be at the before February 1 a signed notice in writing only to bonds, mortgages, or deeds of rate specified therein. claiming the benefit of the deduction for trust, or other similar obligations of a personal exemptions provided in section 151; corporation which were issued before § 1.1442-1 Withholding of tax on for­ nor in the case of a nonresident alien indi­ January 1, 1934, and which contain a eign corporations. For regulations re­ vidual if so provided for in regulations pre­ tax-free covenant. For the purpose of specting the withholding of tax at source scribed by the Secretary or his delegate under section 1451, bonds, mortgages, or deeds under section 1442 in the case of non­ section 874. of trust, or other similar obligations of resident foreign corporations, see §§ 1.- (e) Alien residents of Puerto Rico. For a corporation, are issued when delivered. 1441-1 and 1.1451-1. purposes of this section, the term “nonresi­ dent alien individual” includes an alien If a broker or other person acts as selling § 1.1443 Statutory provisions; foreign resident of Puerto Rico. agent of the obligor, the obligation is tax-exempt organizations. (f) Income of obligor and obligee. The issued when delivered by the agent to obligor shall not be allowed a deduction for the purchaser. If a broker or other per­ S ec. 1443. Foreign tax-exempt organisa­ the payment of the tax imposed by this sub­ son purchases the obligation outright for tions. In the case of income of a foreign title, or any other tax paid pursuant to the organization subject to the tax imposed by the purpose of holding or reselling it, the tax-free covenant clause, nor shall such tax obligation is issued when delivered to section 511, this chapter shall apply to rents -be included in the gross income of the includible under section 512 in computing obligee. such broker or other person. its unrelated business taxable income, but (c) Extended maturity date. In cases only to the extent and subject to such condi­ § 1.145.1-1 Tax-free covenant bonds where on or after January 1, 1934, the tions as may be provided under regulations issued before January 1, 1934—(a) Rates maturity date of bonds or other obliga­ prescribed by the Secretary or his delegate. of withholding—(1) Rate of 2 percent. tions of a corporation is extended, the * § 1.1443-1 Rents paid to foreign tax- Withholding of a tax equal to 2 percent bonds or other obligations shall be con­ exempt organizations. The gross is required in the case of interest upon sidered to have been issued on or after amount of rents paid to a foreign organi­ bonds or other corporate obligations con­ January 1, 1934. The interest on such zation subject to the tax imposed by sec­ taining a tax-free covenant and issued obligations is not subject to the with­ tion 511, which are includible under before January 1, 1934, paid to an indi­ holding provisions of section 1451 but section 512 in computing its unrelated vidual, a fiduciary, or a partnership, falls within the class of interest described business taxable income, is subject to whether resident or nonresident, or to a in section 1441. See «paragraph (c) (5) withhodling of a tax of 30 percent in the nonresident foreign corporation, regard­ (lily of § 1.1441-3. manner prescribed for withholding of the less of whether the liability assumed by (d) Covenant in trust deed. Bonds tax under § 1.1441-1, even though the the obligor is less than, equal to, or issued under a trust deed containing a organization is engaged in trade or busi­ greater than 2 percent. tax-free covenant are treated as if they ness within the United States. (2) Rate of 30 percent. Notwith­ contain such a covenant. If neither the standing subparagraph (1) of this par­ bonds nor the trust deeds given by the TAX-FREE COVENANT BONDS agraph, if the liability assumed by the obligor to secure them contained a tax- § 1.1451 Statutory provisions; tax- obligor does not exceed 2 percent of the free covenant, but the original trust free covenant bonds. interest, withholding is required at the deeds were modified before January 1, rate of 30 percent in the case of pay­ 1934, by supplemental agreements con­ S ec. 1451. Tax-free covenant bonds—(a) taining a tax-free covenant executed by Requirement of withholding. In any case ments to a nonresident alien individual, where bonds, mortgages, or deeds of trust, a nonresident partnership composed in the obligor corporation and the trustee, or other similar obligations of a corporation, whole or in part of nonresident aliens, a the bonds issued before January 1, 1934, issued before January 1, 1934, contain a nonresident foreign corporation, or an are subject to the provisions of section contract or provision by which the obligor owner who is unknown to the withhold­ 1451, provided appropriate authority agrees to pay any portion of the tax imposed ing agent. existed for the modification of the trust by this subtitle on the obligee, or to reim­ (3) Obligations of resident payers. deeds in this manner. The authority burse the obligee for any portion of the tax, must have been contained in the original or to pay the interest without deduction for The rates of withholding specified in sub- any tax which the obligor may be required or paragraphs (1) and (2) of this para­ trust deeds or actually secured from the permitted to pay thereon, or to retain there­ graph are applicable to interest on such bondholders. from under any law of the United States, the tax-free covenant bonds issued by a do­ Federal Reserve bank, for all § 1.1471-1 Recovery of excessive prof­ the payment, repayment, or offset described interest paid by it, whether by check or its on government contracts. The in­ in paragraph (1) or paragraph (2) shall not clusion of the statutory provisions of constitute a deduction for the year in which otherwise. paid or incurred. (b) Person designated to act for with­ section 1471 of the Internal Revenue (4) Exception. The foregoing provisions holding agent. (1)A debtor corporation Code of 1954 in this part does not super­ of this subsection shall not apply in respect having an issue of bonds or other sim­ sede the provisions of Treasury Decision of any contract if the taxpayer shows to the 4906, 26 CFR (1939) Part 17, and Treas­ satisfaction of the Secretary or his delegate ilar obligations which appoints a duly that a different method of accounting for authorized agent to act on its behalf un­ ury Decision 4909, 26 CFR (1939) Part the amount of the payment, repayment, or der the withholding provisions of chapter 16, as made applicable to section 1471 disallowance clearly reflects income, and in 3 is required to file a notice of such ap­ of the 1954 Code by Treasury Decision such case the payment, repayment, or dis­ pointment with the District Director of 6091, 19 F. R. 5167. allowance shall be accounted for with respect \ 5014 RULES AND REGULATIONS to the taxable year provided for under such relates to profits of a taxable year subject to erning the voluntary entry on extended method, which for the purposes of subsec­ the Internal Revenue Code of 1939, the ad­ tions (b) and (c) shall be considered a prior justments in respect of such renegotiation active duty by reservists. taxable year. shall be made under section 3806 of such § 864.53 Eligibility. The approval of . (b) Credit against repayment on account code. an application by a unit commander in­ of renegotiation or allowance—(1) General rule. ■ There shall be credited against the [seal] O. Gordon D elk, dicates only that the reservist concerned amount of excessive profits eliminated the Acting Commissioner meets the general requirements estab­ amount by which the tax for the prior tax­ of Internal Revenue. lished by §§864.51 to 864.54. This ap­ able year under this subtitle is decreased proval does not mean the applicant pos­ by reason of the application of paragraph Approved: June 29, 1956. sesses the qualifications required by the (1) of subsection (a); and there shall be D an T hroop Smith, Air Force at any given time. The factors credited against the amount disallowed the Special Assistant to the Secretary listed in this section affect eligibility as amount by which the tax for the prior tax­ in Charge of Tax Policy. indicated: able year under this subtitle is decreased (a) Extended active duty for purpose by reason of the application of paragraph [F. R. Doc. 56-5350; Filed, July 5, 1956; of technical training. In addition to (2) of subsection (a). 8:49 a. m.] (2) Credit for barred year. If at the time other requirements of §§ 864.51 to 864.54, of the payment, repayment, or offset de­ airmen applying for extended active duty scribed in paragraph (1) or paragraph (2) of to attend technical training as outlined subsection (a), refund or credit of tax under TITLE 32— NATIONAL DEFENSE in § 864.52 (a) (4) must have an Airman this subtitle for the prior taxable year is Chapter VII—-Department of the Classification Battery or Airman Quali­ prevented (except for the provisions of sec­ fying Examination aptitude index equal tion 1311) by any provision of the internal Air Force revenue laws other than section 7122, or by to or higher than those desired mini- rule of law, the amount by which the tax Subchapter F— Reserve Forces mums as shown in the USAF training prospectus for the appropriate course. for such year under this subtitle is decreased P art 864—Enlisted R eserve by the application of paragraph (1) or para­ However, airmen who possess the mini­ graph (2) of subsection (a) shall be com­ voluntary entry on extended active mum desired aptitudes only in equipment puted under this paragraph. There shall first DUTY operator or craftsman of the Airman be ascertained the tax previously determined Classification Battery are not eligible for for the prior taxable year. The amount of the In Part 864, §§ 864.51 to 864.64 are recall for technical training. Airmen tax previously determined shall be the excess rescinded and the following substituted of—1 therefor: who do not have a recorded Airman (A) The sum of— Classification Battery or Airman Quali­ (i) The amount shown as the tax by the Sec. fying Examination test on their records 864.51 Purpose. will be required to take an Airman taxpayer on his return (determined as pro­ 864.52 Use of reserve personnel. vided in section 6211 (b) (1) and (3)), if a 864.53 Eligibility. Qualifying Examination. Individuals return was made by the taxpayer and an 864.54 Submission of applications. scoring below the desired minimums will amount was shown as the tax by the taxpayer not be accepted for extended active duty. thereon, plus Au t h o r it y : §§ 864.51 to 864.54 issued un­ (b) Dependents—(1) Male airmen. (li) The amounts previously assessed (or der R. S. 161, sec. 202, 61 Stat. 500, as amend­ collected without assessment) as a deficiency, ed; 5 U. S. C. 22, 171a. Interpret or apply (i) In pay grade E-l, E-2 or E-3, having over— sec. 233d, 66 Stat. 490; 50 U. S. C. 961d. more than one dependent, are not (B) The amount of rebates, as defined in D erivation: AFR 45-21, March 20, 1956. eligible. section 6211 (b) (2), made. (ii) In pay grade E-4, having more § 864.51 Purpose. Sections 864.51 to than two dependents, are eligible if at There shall then be ascertained the decrease 864.54 explain how warrant officers and in tax previously determined which results least four years of service for pay pur­ solely from the application of paragraph (1) airmen of the Air Force Reserve and the poses have accrued. or paragraph (2) of subsection (a) to the Air National Guard may volunteer for (iii) In pay grade E-5, E-6 or E-7, prior taxable year. The amount so ascer­ extended active duty. It does not apply having one or more dependents, are tained, together with any amounts collected to airmen retired and transferred to the eligible. as additions to the tax or interest, as a result Reserve after twenty years of active (2) Female airmen.

sites on the public domain, and the T. 2 S., R. 6 Wr, U in ta S pecial M eridian Executive order of July 2,1910, ratifying, Sec. 13, Ni/2SWi/4 and S%SE^; confirming, and continuing the said Sec. 14, NE^SE^ and N^SW»4; T. 2*S., R. 7 W., sec. 15, Ny2ay2; Sec. 9, SW»4NEi4 and NE&SE^. order of May 4, 1909, in full force and Sec. 16, Ny2sy2 and sy2SW%; T. 1 S., R. 8 W., effect, and reserving the land^ so with­ Sec. 17, Ny2sy2 and S^SE%; Sec. 3, Wy2SW%; drawn for water-power sites as Power Sec. 18, lot 3, NE%SWi4, N^SE%, and Sec. 4, NE&SE&; Site Reserve No. 1, are hereby revoked SEy4SE%; Sec. 10, NE%NW&; so far as they affect the following- Sec. 19, lots 1, 2, SE&NWyi, and Sy2NE^; Sec. 14, SW*/4NW54. described lands: Sec. 20, Sy2Ny2; Sec. 21, Sy2Ny2; The areas described aggregate 280 U in ta S pecial M eridian Sec.22,Sy2Ny2; acres. 3. The lands described in paragraphs T. 2 S., R. 5 W., Sec. 23, Sy2Ny2; Sec. 19, lots 1,4, and SE&NE&j Sec. 24, Sy2NWi4. 4 and 2 above are undisposed of opened Sec. 20, Ni/2SEi4; T. 2 S., R. 7 W., lands of the Uintah and Ouray Indian Sec. 21, Ni/2SW&, SE^SW ^, and S&SEJA;1 Sec. 10, w y2sw y 4 and SE^SW’A; Reservation restored to tribal ownership Sec. 27, NW!4NW>4; Sec. 13, SW&SW^ and NE&SE^; for use and benefit of the Ute Indian Sec. 28, N%NEi4; Sec. 14, SW»4NWi4, Ni/2SWV4, SEJ4SWV4, Tribe of the Uintah and Ouray Reserva­ Sec. 29, NE%NE»4 and Si/2NW^; W%SE%, and SE%SE%; tion in Utah, and added to and made a Sec. 30, lot 1, S&NE^, NW&NE&, and Sec. 15, Sy2NE»4, NW&NEft, and NE^ E^Nwy4; nw%; part of the existing reservation by the Sec. 33, Ny2NEJy4, and SE^NE^; Sec. 23, N^NEi/4; order of the Secretary of the-Interior Sec. 34, SE&NW^, W&NW$£, N ^SW ^, Sec. 24, Ny2Ny2 and SE14NE&. of August 25, 1945 (10 P. R. 12409). SE14SW14, and SVfcSE%. The areas described aggregate 5,079.96 This order shall be known as Power T. 3 S., R. 5 W., acres. Site restoration No. 515. Sec. 2, lot 4, SWi4NWi4, W»/2SW}4, and SE^SWi/4; 2. The Executive order of January 23, W esley A. D ’Ewart, Sec. 3, lots 1, 2, and SE^NE^; 1912, reserving certain lands in Utah Assistant Secretary of the Interior. * Sec. 11, Wi/zNE^, B&NW54, and NWV4 for water-power sites as Power Site Re­ sb%: serve No. 243, is hereby revoked so far J une 29,1956. Sec. 12,W%B%; as it affects the following-described IP. R. Doc. 56-5334; Piled, July 5, 1956; Sec. 13, W&EVi. lands: 8:46 a. m.]

PROPOSED RULE MAKING

DEPARTMENT OF HEALTH, EDU­ Zellerbach Corporation, 343 Sansome water slurry of the sample is contin­ CATION, AND WELFARE Street, San Francisco 19, California, pro­ uously extracted by heptane during the posing that the pesticide chemical operation. Interfering substances are Food and Drug Administration diphenyl be exempted from the require­ removed from the heptane extract by ment of a tolerance when it is applied oxidizing with a solution of potassium [21 CFR Part 1201 as a post-harvest treatment to grape­ permanganate in 50-percent acetic acid. fruit, lemons, and oranges. T olerances and Exemptions P rom Tol­ The diphenyl in the heptane fraction is Three analytical methods are pro­ then determined spectrophotometrically erances for P esticide Chemicals in or posed in the petition for determining on R aw Agricultural Commodities at 248 m/i by comparison with a standard residues of diphenyl, as follows: solution of diphenyl in heptane that has notice of filing of petition for estab­ 1. The method published in the Jour­ been treated in the same way as the sam­ lishment OF EXEMPTION FROM NECES­ nal of Agricultural and Food Chemistry, ple. SITY OF TOLERANCE FOR RESIDUES OF Volume 2, page 1031 (1954). DIPHENYL 2. The method published in Analyti­ Dated: June 28, 1956. cal Chemistry, Volume 26, page 1234 Pursuant to the provisions of the Fed­ (1954). [seal] J ohn L. H arvey, eral Food, Drug, and Cosmetic Act (sec. 3. A method in which diphenyl is ex­ Deputy Commissioner of 408 (d) (1), 68 Stat. 512; 21 U. S. C. 346a tracted in a liquid-liquid extractor (mod-, Food and Drugs.

NOTICES

DEPARTMENT OF THE INTERIOR having cause may present their objec­ the East line of Section 6 for one mile; thence tions in writing to the undersigned offi­ East two miles; thence South one mile; Bureau of Land Management cial for the Bureau of Land Management, thence East one mile; thence South one mile; thence East two miles; thence South one Alaska Department of the Interior, Box 480, Anchorage, Alaska. mile; thence East one mile to the top of the NOTICE OF PROPOSED WITHDRAWAL AND If circumstances warrant it, a public ridge separating the Campbell and Ship RESERVATION OF LANDS Creek drainages; thence In a northerly di­ hearing will be held at a convenient time rection along said ridge line for a distance The Department of the Army has filed and place, which will be announced. of approximately five miles to a point that an application, Serial No. Anchorage The determination of the Secretary on will be the northeast corner of Section One, 023002, for the withdrawal of the lands the application will be published in the Township 12 North, Range 2 West, when sur­ described below, from all forms of appro­ F ederal R egister, a separate notice veyed; thence West five miles to the Point of priation under the public land laws in­ will be sent to each interested party of Beginning. cluding the mining and mineral leasing record. The lands involved in the application Containing approximately 8,465.94 laws. are: acres. The applicant desires the land for use F ort R ichardson—T ract M R oger R. R obinson, as a training and impact area. Beginning at the northeast corner of Sec­ Operations Supervisor. For a period of 60 days from the date tion 6, Township 12 North, Range 2 West, of publication of this notice, persons [F. R. Doc. 56-5336; Filed, July 5, 1956; Seward Meridian, Alaska; thence South along 8:46 a. m.l Friday, J u ly 6, 1956 FEDERAL REGISTER 5017 [Group 294[ T. 18 S..R. 13 E* NEW MEXICO PRINCIPAL MERIDIAN, COLORADO Sec. 24: All; Sunshine Campground: A r iz o n a Sec. 25: All; T. 42 N., R. 9 W., Sec. 36: All. NOTICE OF FILING OF PLAT OF SURVEY Sec. 20: Ei/2Ei/2SWy4NWi4. SE%NW^, T. 18 S., R. 14 E., less small acreage included in MS 1495 J u n e 29,1956. Sec. 29: All; Gilden Age Placer in the Ey^E^SWVi Sec. 30: All; nw%. Notice is given that the plat of survey Sec. 31: All; accepted October 25, 1955, of T. 35 N., R. Canyon Creek Picnic Ground: Sec. 32: All; T. 43 N., R. 8 W., 5 W., G. & S. R. B. & M., Arizona, includ­ Sec. 33: SW%. Sec. 12: NW&NE^SWyi. NE^NWVi ing lands hereinafter described, will be T. 18 S., R. 15 E., SW'4 (less any portion included officially filed in the Land Office at Sec. 3: All; within mining patents). Phoenix, Arizona, effective at 10:00 a. m. Sec. 4: Ny2, SE^. Antone Springs Picnic Ground: on the 35th day after the date of this T. 19 S., R. 14 E., T. 47 N., R. 12 W., notice: Sec. 4: All; Sec. 15: SWy4NE%. W&SEV4NE14. Sec. 5: All; Iron Springs Picnic Ground: Gila and S alt R ives Meridian, Arizona Sec. 6: All; T. 47 N., R. 12 W., qV OR Iff P R W Sec. 9: All; sec. 23: sy2Nwy4Nwy4, Ny2swy4Nwy4. Sec. 10: S»/2,NW ^; Nwy4SEy4Nwy4. ‘Lots 1. 2, 3, 4,‘si/2Ni/2, Sy2 (all), Sec. 15: All; Sec. 2. Smokehouse Picnic Ground: Sec. 16: All; T. 48 N„ R. 14 W.w Within the above-described areas are Sec. 22: N E^SE^. Sec. 9: SE&NE^. 639.96 acres of non-public lands. Florida Canyon, Coronado National Forest: Columbine Picnic Ground: T. 19 S„ R. 15 E., T. 48 N., R. 14 W., Available data indicates that this land Sec. 19: W‘/2W*/2,NEy4; in T. 35 N., R. 5 W. is gently rolling, and Sec. 11: Ei/2SWi4NEy4SW<4, W ^SW ^ Sec. 20: wy2SWy4; NE 1/4 SW 1/4 , NE14SE14SWV4. the soil is sandy and gravelly clay loam. sec. 29: wyjNWii, swyi; Cobb Springs Picnic Ground; Subject to valid, existing rights, the Sec. 30: Ny2NEi/4, SE&NB%, NE&NW&, T. 48 N., R. 14 W., State’s title attached to all of the subject T. 20 S., R. 15 E. (unsurveyed), Sec. 14: SE%SEy4. land upon the acceptance of the plat of Sec. 5: NW&NW^. T-Bone Springs Picnic Ground: survey. The areas described total 751.04 acres T. 49 N., R. 15 W., In view of the above, the lands de­ in the Coronado National Forest and Sec. 32: NE^SE^NE^NEyi, SE^NEVJ, scribed will not be subject to disposition NEy4NEy4; 10,536.44 acres in the Santa Rita Ex­ Sec. 33: SW^NWyiNW&NWyi, NW& under the general public land laws by perimental Range. reason of the official filing of this plat. sw»ANwy4Nwy4. E . R . T r a g it t , Total area, 375 acres, more or less. T h o s . P . B r it t , State Lands and Minerals Manager. Staff Officer. J . E l l io t t H a l l , Acting State Supervisor. [F. R. Doc. 56-5339; Filed, July 5, 1956; [F. R. Doc. 56-5341; Filed, July 5, 1956; 8:47 a. m.] [F. R. Doc. 56-5337; Filed, July 5, 1956; 8:47 a. m.] 8:46 a. m.]

[Document 132 [ Colorado [Montana 021637] A r iz o n a NOTICE OF PROPOSED WITHDRAWAL AND M o n t a n a NOTICE OF PROPOSED WITHDRAWAL AND RESERVATION OF LANDS RESERVATION OF LANDS * ORDER PROVIDING FOR OPENING OF PUBLIC J une 28,1956. LANDS J une 29,1956. The United States Forest Service of The Department of Agriculture has the Department of Agriculture has filed J u n e 28, 1956. filed an application, Serial No. AR- an application, Serial No. Colorado 1. In exchange of lands made under 011738, for the withdrawal of the lands 013297, for the withdrawal of the lands the provisions of section 8 of the act of described below, from all forms of ap­ described below, from all forms of ap­ June 28,1934 (48 Stat. 1272) as amended propriation including the general min­ propriation under the public land laws, by section 3 of the act of June 26, 1936 ing laws. including the general mining laws but (49 Stat. 1976) the following described The applicant desires the land for re­ not the mineral leasing laws, subject to ‘lands have been reconveyed to the United search purposes in the improvement and existing valid claims. States: management of semi-desert grassland The ajpplicant desires the land for use M ontana P rincipal M eridian as picnic and camp grounds in the Un- ranges and for protection of a reservoir, T. 3 N., R. 61 E., its catchment area and the springs which compahgre National Forest. Sec. 19: Lot 12. supply water for the Headquarters of For a period of thirty (30) days from T. 26 N., R. 38 E., the Santa Rita Experimental Station. the date of publication of this notice, Sec. 36: All. For a period of 30 days from the date persons having cause may present their T. 26 N., R. 39 E., of publication of this notice, persons hav­ objections in writing to the undersigned Sec. 16: All. ing cause may present their objections official of the Bureau of Land Manage­ T. 27 N., R. 34 E., in writing to the undersigned official of ment, Department of the Interior, 357 Sec. 30: Ey2SWi4; \ New Custom House, P. O. Box 1018, Den­ Sec. 31: NEV4NW54« the Bureau of Land Management, De­ T. 28 N.,'R. 34 E., partment of the Interior, 233A Main ver 1, Colorado. Sec. 26: S»4. Post Office Building, Phoenix, Arizona. If circumstances warrant it, a public T. 33 N., R. 27 E., If circumstances warrant it, a public hearing will be held at a convenient time Sec. 11: Wy2; hearing will be held at a convenient and place, which will be announced. Sec. 14: N%; time and place, which will be announced. The determination of the Secretary on Sec. 15: NEy4. the application will be published in the T. 9 S., R. 12 W., The determination of the Secretary on Sec. 10: NE»4SWy4. F ederal R egister. A separate notice the application will be published in the T. 5 S., R. 60 E., Federal R egister. A separate notice will be sent to each interested party of Sec. 24: wy2NEy4, SE^N E ^. will be sent to each interested party of record. T . 5 S„ R. 61 E., record. The land? involved in the application Sec. 19: sy2Ny2,NEV4NWiA. The lands involved in the application are: T . 7 S., R . 49, E., are; U ncom pahgre National F orest Sec. 26: Ey2S W ft; Sec. 27: Lot 1. SIXTH PRINCIPAL MERIDIAN, COLORADO G ila and Salt R iver Meridian 2. The areas described above total Santa Rita Experimental Range: Carson Hole Picnic Ground: 3,040 acres of lands. The lands produce T. 17 S„ R. 15 E., T. 15 S., R. 101 W., grass and other forage that are used for Sec. 33: All; Sec. 24: E%NEy4, SE^NW ^NE^, NE^ Sec. 34; All. SWy4NEV4. support of livestock and wildlife. The 5018 NOTICES

topography varies from flat to rough and preferably a complete photostatic copy dren of veterans killed in the line of broken areas. All the tracts are classi­ of the certificate of honorable discharge. duty. Drawing-entry cards (Form 4- fied as grazing lands as they are un­ Persons claiming preference rights 775) are available upon request from suited to a more intensive type of agri­ based upon valid settlement, statutory the Manager, Land Office, P. O. Box 3861, cultural development. preference, or equitable claims must en­ 1001 N. E. Lloyd Blvd., Portland 8, 3. No application for these lands will close properly corroborated statements Oregon. be allowed under the homestead, desert in support of their applications, setting Drawing-entry cards will be accepted land, small tract, or other non-mineral forth all facts relevant to their claims. if filled out in compliance with the in­ public land law, unless the lands have al­ Detailed rules and regulations governing structions on the form and filed with ready been classified as valuable, or suit­ applications which may be filed pur­ the above-named official prior to 10:00 able for such type of application, or shall suant to this notice can be found in Title a. m. Thursday, August 2, 1956. A pub­ be so classified upon consideration of an 43 of the Code of Federal Regulations. lic drawing will be held on that date but application. Any application that is Inquiries regarding the lands shall be persons filing cards need not be present filed will be considered on its merits. addressed to the Manager, Land Office, to qualify. Any person who submits The lands will not be subject to occu­ Bureau of Land Management, Billings, more than one card will be declared in­ pancy or disposition until they have been Montana. eligible to participate in the drawing. classified. T heo E. Anhder, The successful drawees will be awarded 4. The lands described as the SV£ Sec. Manager, Land Office. the tracts in the order in which they are 26, T. 28 N., R. 34 E., W &NE^, SEft [P. R. Doc. 56-5335; Piled, July 5, 1956; drawn. Persons who file cards will be NEVi Sec. 24, T. 5 S., Rr 60 E., 8:46 a. m.] notified of the results of the drawing. NE&NWft Sec. 19, T. 5 S., R. 61 E., EV2 Successful drawees will be allowed 15 SW& Sec. 26, Lot 1, Sec. 27, T. 7 S., R. 49 days in which to execute the lease forms E„ have been open for location and entry (Form 4-776), in accordance with in­ under the general mining laws and min­ A cting Area Administrator et al.; Area I structions and return them with the eral leasing laws. On other lands payment of filing fees and rentals. affected by this order for opening the DELEGATION OF AUTHORITY WITH RESPECT minerals have been reserved to former TO REAL PROPERTY AND RELATED PERSONAL Any tracts for which lease forms have PROPERTY not been filed and accompanied by the owners. required payments within the 15 day 5. Subject to any existing rights and Under authority conferred by Direc­ period will immediately thereafter be­ the requirements of applicable law, the tor’s Order No. 614, dated June 12, 1956, come available to alternate drawees in lands described in paragraph 1, above, the Acting Area Administrator, the Area the order in which their cards were are hereby opened to filing of applica­ Administrative Officer, and the Area drawn. tions and selections in accordance with Property and Supply Officer are author­ the following: ized to transfer, donate, or dispose of C. Paragraph 9 is revoked in its en­ (a) Applications and selections under real property and related personal prop­ tirety and the following paragraph sub­ the nonmineral public land laws may be erty excess to the needs of the Bureau of stituted: presented to the Manager mentioned be­ Land Management, Area I. 9. The Oregon State Highway Com­ low, beginning on the date of this order. mission has waived its right to apply for Such applications and selections will be Dated this 26th day of June 1956. any part or portion of the lands described considered as filed on the hour and re­ J ames F. D oyle, in paragraph 1 of the above cited docu­ spective dates shown for the various Area Administrator, Area I, ment for highway right-of-way or mate­ classes enumerated in the following Bureau of Land Management. rial site as allowed by the act of May 28, paragraphs: [P. R. Doc. 56-5338; Piled, July 5, 1956; 1948 (16Btat. 275). (1) Applications by persons having 8:47 a. m.J prior existing valid settlement rights, t R ussell E. G etty, preference rights conferred by existing Acting State Supervisor. laws, or equitable claims subject to al­ [P. R. Doc. 56-5340; Filed, July 5, 1956; 8:47 a. m.] lowance and confirmation will be ad­ [Classification 56-2, Amdt.] judicated on the facts presented in support of each claim or right. All ap­ Oregon DEPARTMENT OF COMMERCE plications presented by persons other SMALL TRACT OPENING than those referred to in this paragraph • Federal Maritime Board will be subject to the applications and J une 27, 1956. claims mentioned in this paragraph. Effective June 8, 1956, paragraphs 4, Matson N avigation Co. and F red. Olsen (2) All valid applications by qualified 8 and 9, of the Federal Register Docu­ & Co. veterans of World War n or of the ment No. 56-4709 appearing on page NOTICE OF AGREEMENT FILED FOR APPROVAL Korean Conflict, and by others entitled 4233 of the issue for June 15, 1956, are Notice is hereby given that the follow­ to preference rights under the Act of hereby amended or revoked as follows: ing described agreement has been filed September 27, 1944 (58 Stat. 747; 43 A. The items listed in the tabulation with the Board for approval pursuant to U. S. C. 279-284 as amended), presented contained in paragraph 4, under the section 15 of the Shipping Act, 1916, 39 prior to 10:00 a. m. on August 3, 1956, heading “Advance Rentals 3-years,” are Stat. 733, 46 U. S. C. 814. will be considered as simultaneously filed amended to read: $30.00. Agreement No. 8058-2, between Mat- at that hour. Rights under such prefer­ B. Paragraph 8 is revoked in its en­ son Navigation Company and Fred. Ol­ ence right applications filed after that tirety and the following paragraph- substituted: sen & Co. (Fred. Olsen Line), modifies hour and before 10:00 a. m. on November approved transhipment agreement (No. 2, 1956, will be governed by the time of 8. The lands are now open to filing of 8058), (1) to include ports in Africa as filing. drawing-entry cards (Form 4-775) only ports of destination, and (2) to provide (3) All valid applications and selec­ by persons entitled to veterans’ prefer­ through rates to additional ports as spec­ tions under the non-mineral public land ence. In brief, persons entitled to such ified. Agreement No. 8058, as amended, laws, other than those coming under preference are (a) honorably discharged presently covers the transportation of paragraphs (1) and (2) above, presented veterans who served in the armed forces canned pineapple and canned pineapple prior to 10:00 a. m. on November 2,1956, of the United States for a period of at juice under through bills of lading from will be considered as simultaneously filed least 90 days after September 15, 1940, Hawaii to Great Britain, Northern Ire­ at that hour. Rights under such appli­ (b) surviving spouse or minor orphan land, Irish Free State, European cations and selections filed after that children of such veterans, and (c) with Continental, Baltic, Scandinavian and hour will be governed by the time of the consent of the veteran, the spouse filing. Mediterranean Sea ports, with tran­ of living veterans. The 90-day require­ shipment at U. S. Pacific Coast ports. Persons claiming veterans' preference ment does not apply to veterans who Interested parties may inspect tljls rights under paragraph (2) above, must were discharged on account of wounds agreement and obtain copies thereof at enclose with their applications proper or disability incurred in the line of duty the Regulation Office, Federal Maritime evidence of military or naval service. or the surviving spouse or minor chil- Board, Washington, D. C., and may sub- Friday, J u ly 6, 1956 FEDERAL REGISTER 5019 power turbine connected to an 1800-kilo­ area in neighboring States and shall co­ mit, within 20 days after publication of operate with agencies in such States to this notice in the F ederal R egister, writ­ watt generator (2250 KVA, 80 percent insure compliance with this requirement. ten statements with reference to the PF); the East powerhouse containing In the event of disagreement between the agreement and their position as to ap­ two 884-horsepower turbines connected Licensee and the power marketing agencies proval, disapproval, or modification, to­ to 625-kilowatt generators (625 KVA, 100 (public and private) in any of the other gether with request for hearing should percent P F ); the center powerhouse sec­ States within the economic market area, the such hearing be desired. tion which contains operating and Licensee further agrees that the Commission switching equipment; two 5 KV trans­ may determine and fix the applicable portion Dated: June 29, 1956. mission lines each about 2000 feet long of power capacity and power output to be made available hereunder and the terms By order of the Federal Maritime extending to the Paper Mill; and ap­ applicable thereto: Provided, That if any Board. purtenant mechanical and electrical State shall have designated a bargaining equipment. The energy generated by [seal! A. J. W illiams, agency for the procurement of such power Secretary. this project is utilized by the applicant capacity and power output on behalf of such in the manufacture of paper products. State, the Licensee shall cooperate and deal [P. R. Doc. 56-5362; Filed, July 5, 1956; Protests or petitions to intervene may only with such agency in that State. 8:52 a. m.] be filed with the Federal Power Com­ mission, Washington 25, D. C., in accord­ In addition to its view that no part of ance with the rules of practice and pro­ the Commonwealth of Massachusetts is ATOMIC ENERGY COMMISSION within the economic market area of cedure of the Commission (18 CFR 1.8 Project No. 2000, it appears that the [Docket No. F-27] or 1.10). The ’last date upon which pro­ tests may be filed is'August 22, 1956. Power Authority is also of the view that State College of W ashington the request made by the Department was The application is on file with the Com­ not for a reasonable portion of the power notice of application for utilization mission for public inspection. capacity and power output of the project. facility license [ seal] Leon M. F uquay, The Commission finds: It is appropri­ Please take notice that on June 22, Secretary. ate and in the public interest in carrying 1956 State College of Washington, Pull­ [F. R. Doc. 56-5356; Filed, July 5, 1956; out the provisions of the Federal Power man, Washington, filed an application 8:51 a. m.] Act, and the provisions of the license for under section 104c of the Atomic Energy project No. 2000 issued thereunder, that Act of 1954 for a license to construct, a hearing be held on the aforesaid com­ possess and operate a “swimming pool” plaint and answer, as hereinafter pro­ type nuclear reactor designed to operate [Project No. 2000] vided. at 100 KW and to be located on the D epartment of P ublic U tilities of The Commission orders: University’s campus, Pullman, Washing­ Commonwealth of Massachusetts v. (A) Pursuant to the authority con­ ton. P ower Authority of S tate of N ew tained in and subject to the jurisdiction Y ork conferred upon the Federal Power Com­ Dated at Washington, D. C., this 28th mission by the Federal Power Act, par­ day of June 1956. ORDER INVESTIGATING COMPLAINT AND ticularly sections 306 and 308 thereof, For the Atomic Energy Commission. FIXING HEARING and the Commission’s rules of practice The Department of Public Utilities and procedure, a public hearing, shall be H. L. P rice, Director, of the Commonwealth of Massachusetts held on September 11,1956 at 10:00 a. m., Division of Civilian Application. (the Department) filed a complaint on * e. d. s. t., in a hearing room of the Federal February 24, 1956, stating that the com­ Power Commission, 441 G Street NW., [P. R. Doc. 56-5353; Filed. July 5, 1956; monwealth of Massachusetts has desig­ Washington, D. C.,.for the purpose of in­ 8:50 a.m.] nated the Department as the bargaining vestigating the matters involved and the agency on behalf of the Commonwealth issues presented by the aforesaid com­ for the procurement of a portion of the plaint and answer and determining and FEDERAL POWER COM MISSION power capacity and power output of Proj­ fixing the applicable portion of power [Project No. 2207] ect No. 2000, that the Power Authority capacity and power output of Project No. of the State of New York (the Power 2000, if any, to be made available to the Mosinee Paper Mills Co. Authority) has disapproved application Department of Public Utilities of the NOTICE OF APPLICATION FOR LICENSE made by the Department for a portion of Commonwealth of Massachusetts, and such power in the amount of 250,000 Kw •the terms applicable thereto, pursuant to J une 29, 1956. of firm demand, and that consequently Article 28 of the license. Public notice is hereby given that the the Department is requesting that the (B) Petitions to intervene may be filed Mosinee Paper Mills Company of Wau­ Federal Power Commission determine with the Federal Power Commission, sau, Wisconsin, has filed application and fix the applicable portion of power Washington 25, D. C., in accordance with under the Federal Power Act (16 U. S. C. capacity and power output of project the Commission’s rules of practice and 791a-825r) for license for constructed No. 2000 to be made available to the procedure (18 CFR 1.8) on or before Au­ Project No. 2207 located on Wisconsin Commonwealth of Massachusetts by the gust 20,1956. River in the city of Mosinee, Marathon Power Authority, as Licensee for Project County, Wisconsin, which consists of a No. 2000, pursuant to Article 28 of the Issued: June 28,1956. rock-filled timbercrib spillway section license. By the Commission. about 356 feet long with flash boards A copy of the complaint was served on [seal] Leon M. F uquay, and a 20-foot concrete spillway section the Power Authority which filed its an­ Secretary. on each end; a timber dam about 47 feet swer thereto on May 3, 1956. In its long with rock-filled timber-crib abut­ answer the Power Authority states [F. R. Doc. 56-5354; Filed, July 5, 1956; ment sections on each end; a concrete among other things, that there is no 8:50 a. m.] guard lock section, which comprises the valid reason to extend the market area main spillway, with 9 vertical gate sec­ of Project No. 2000 beyond a 150-mile tions and 5 sections equipped with stop area from the Project at Massena, New logs; a reservoir with a normal elevation York. Article 28 of the license issued to [Docket No. G-2281] of 1138.5 feet (USGS) and an area of the Power Authority for the construc­ Ohio F uel Gas Co. 674 acres; a powerhouse and dam section tion, opération, and maintehance of located about 1500 feet downstream from Project No. 2000 in the International FINDINGS AND ORDER DENYING MOTION TO the main structures comprised of two Rapids section of the St. Lawrence River, DISMISS, REVERSING DECISION OF PRESID­ reads as follows: ING EXAMINER AND PRESCRIBING THE FIL­ rock-filled timber crib sections, one con- ING OF TARIFF SHEETS crete gated spillway section, two sepa­ Article 28. The Licensee shall make a rate concrete powerhouse sections and reasonable portion of the power capacity and This is a rate proceeding under the earth fill abutment sections; the West a reasonable portion of the power output Natural Gas Act involving our review of Powerhouse containing a 2500-horse- available for use within the economic market a rate filing by the Ohio Fuel Gas Com- No. 130— 4 5020 NOTICES pany (Ohio Fuel). On September 18, Extensive hearings were held in this Finally, in arriving at a cost of service, 1953, Ohio Fuel tendered for filing its docket (No. G-2281) and, after briefs we resolve herein two adjustments to FPC Gas Tariff, Second Revised Volume were filed by interested parties1 and Ohio Fuel’s cost of service which are No. 1, embodying an increase in the then Commission Staff Counsel, the Presiding questioned by Dayton. effective rates and charges to its whole­ Examiner issued his initial decision on After contesting Ohio Fuel’s rate filing sale customers. The tariff would in­ April 2, 1956. on its merits ovér a period of two and crease the rates then being collected sub­ In his decision, the Presiding Examiner one-half years, Dayton, on June 1, 1956, ject to refund in Docket No. G-1965 by found the proposed increase in the rate filed a motion to dismiss and reject Ohio approximately $1,418,940, or 7.6 percent level and the proposed application of the Fuel’s filing so far as it relates’ to a annually, based on sales for the year CD rate form to be unjust and unreason­ change in rate form. Dayton now claims ended June 30, 1953. Importantly, the able. Eor the period March 1, 1954 (the that the Commission has no jurisdiction filing also would apply a contract demand date on which the proposed rates went to entertain the filing, basing its con­ (CD), rate form to sales made to Ohio into effect subject to refund), through tention on the theory that the filing Fuel’s distribution company customers. the December 1954 billing month, the constitutes a unilateral change in its Under this rate form, determination of Presiding Examiner would prescribe a contract with Ohio Fuel forbidden by the billing demand would be based on the rate of $1.52 per Mcf of demand and recent decisions in United Gas Pipe Line customer’s single day peak during the 34.90 cents per Mcf of commodity, using Co. v. Mobile Gas Service Corp., 350 U. S. twelve-month period ending with the the average demand basis. For the next 332, and F. P. C. v. Sierra Pacific Power current billing month but would not be twelve months, the January 1955 billing Co., 350 U. S. 348. Ohio Fuel, by answer less than 90 percent of the customer’s month through the December 1955 bill­ filed on June 11, 1956, opposes the mo­ contract demand nor more than the con­ ing month, he would prescribe a rate of tion principally on the ground that the tract demand. The customers would be $1.60 per Mcf of demand and 35.76 cents billing demand provision proposed to be required to pay for at least 90 percent per Mcf of commodity, likewise on the changed in its filing had previously, in of the contract demand over the life of average demand basis. Without appli­ itself, altered and superseded the billing the service agreement, usually twenty cable adjustments for refunds, the latter demand provision in the original con­ years. rate for all wholesale sales as a group tract now relied upon by Dayton. Ohio By order issued October 16, 1953, as would result in the same rate level as the Fuel therefore contends that the billing amended by order of October 26, 1953, $2.00/33.38 cents rate which.we accepted demand provision in the contract is no we suspended the use of the proposed as just and reasonable upon a different longer applicable. tariff until March 1, 1954, and fixed a record in our order issued December 22, In the circumstances of these proceed­ date for public hearing concerning the 1954, in Docket Nos. G-1786 and G-1965. ings we deem it unnecessary for the pur­ lawfulness of the rates, charges, classi­ However, since the refund relates only to poses of our decision herein to decide fications and services set forth therein. a past period, the Presiding Examiner between the foregoing opposing conten­ The rate schedule contained in the tariff recommends a balanced unit rate so that tions. It is our opinion that the Sierra (Rate Schedule CDS-1), which would be the demand and commodity components Pacific and Mobile decisions do not re­ applicable to Ohio Fuel’s twenty-five would recover only the amounts classi­ quire us, at this stage of the proceedings wholesale customers, was composed of a fied in each category. From the Janu­ where we have a complete record before demand charge of $1.85 per Mcf and a ary 1956 billing month for the remainder us, to undo the work of the last two and commodity charge of 32.5 cents per Mcf. of the refund period and for the future, one-half years. Significantly, the This compared with a rate of $1.75 per the Presiding Examiner would prescribe Supreme Court modified the instructions Mcf of demand and 30.0 cents per Mcf a rate of $2.00 per Mcf of demand and of the Court of Appeals in the Sierra of commodity in effect subject to re­ 33.38 cents per Mcf of commodity. Ab­ Pacific case w'hich would have required fund in Docket No. G-1965 at the time sent applicable refund adjustments this the Commission to begin anew with a of the filing. is identical, both as to level and as to proceeding under Section 206 of the Fed­ Subsequently, by order issued March form, with the rate we accepted by our eral Power Act (comparable to section 5 26,1954, we pefmitted Ohio Fuel to sub­ order issued December 22,1954, in Docket of the Natural Gas Act). The Supreme stitute a revised tariff sheet which re­ Nos. G-1786 and G—1965 and results from Court directed that (350 U. S. at 353): duced the demand charge to $1.75 per the Presiding Examiner’s finding that If the proceedings here satisfied in sub­ Mcf without changing the commodity Ohio Fuel failed to sustain its burden of stance the requirements of §206 (a), it charge of 32.5 cents per Mcf. By the proof in justifying its proposed rate would seem immaterial that the investiga­ same order we made Ohio Fuel’s FPC Gas schedule changes. tion was begun as one into the reasonable­ Tariff, Second Revised Volume No. 1, as Exceptions to the initial decision of ness of the proposed rate rather than the revised, effective subject to refund as of the Presiding Examiner were filed by existing contract rate. March 1,1954. Ohio Fuel, The Cincinnati Gas & Electric Here, the proceedings satisfy, in sub­ As we have indicated, at the time of Company, and the City of Cincinnati stance, the requirements of section 5 of Ohio Fuel’s filing in this docket, the (referred to herein collectively as Cin­ the Natural Gas Act. As we show below, Commission had under consideration cinnati) and The Dayton Power and continued billing by Ohio Fuel under the earlier rate increase filings of Ohio Fuel. Light Company (Dayton). The excep­ average demand basis heretofore used is Those proceedings resulted in our Opin­ tions raise several issues for our deter­ no longer in the public interest. Since ion No. 273, issued July 26, 1954, and an mination, the most important of which our order approves the CD rate form for order on rehearing issued December 22, is the question of rate form. We also the future only, no change in rate form 1954, in Dockets Nos. G-1786 and G-1965 determine the question of the proper is made effective prior to the date of approving a settlement agreement. We rates for the future and for the refund issuance of our order. there rejected the proposed use of the period, including the rate of return for We have given careful consideration CD rate form and prescribed rates for that period. Additionally, we resolve to each of the issues presented to us by the refund period March 1,1952, through questions as to the proper classification the exceptions of the various parties and February 28, 1953 ($2.00/29.80 cents), of costs between the demand and com­ by the motion to dismiss. We have de­ and for the refund period March 1,1953, modity components as they are associ­ cided that, for the reasons hereinafter through February 28, 1954 ($2.00/33.38 ated with (a) gas purchased from Texas cents), both subject to further-refunds stated, the decision of the Presiding Ex­ Eastern Transmission Corporation, (b) aminer in its major aspects should be re­ and adjustments as therein provided. LPG Plant—Depreciation, Return and These rates utilized a billing demand versed and the motion should be denied. Taxes, and (c) Natural Gas Production The extent of our reversal of the Pre­ based upon the greatest average daily Plant—Depreciation, Return and Taxes. delivery of gas to Buyer during any bill­ siding Examiner’s decision is clear from our findings and conclusions which fol­ ing month in the twelve (12) billing 1 By order issued March 12, 1954, we per­ months ending with the close of the mitted the following to intervene : The Day- low. current billing month (hereinafter re­ ton Power and Light Company, The Cincin­ Rate form. The Presiding Examiner ferred to as the “average demand” nati Gas & Electric Company, City of Lan­ rejected Ohio Fuel’s -proposal to make basis). caster, Ohio, and Ohio Gas Company. the CD rate form applicable to its juris- Friday, July 6, 1956 FEDERAL REGISTER 5021 dictional customers* He apparently through demand charges is no longer ible in cost of service for jurisdictional felt bound by our previous decision in just and reasonable. customers and to classify those costs be­ Opinion No. 273, where we rejected the The CD rate form, as proposed by Ohio tween demand and commodity com­ use of the CD rate form by Ohio Fuel. Fuel and which we find just and reason­ ponents. Exceptions to the initial He found the CD rate form to be unjust able under the circumstances of this decision of the Presiding Examiner raise and unreasonable even though by his case, will tend to stabilize recovery of several issues, both in regard to items own statement the record contains “facts demand charges collected from the dis­ properly includible in the cost of service and expert opinions extant upon which tribution company customers.* Addi­ and to the classification of certain costs a different result could be based.” Those tionally, the CD rate form, with its 90 between demand and commodity. There facts, and the conclusions we draw from percent ratchet provision, will encour­ are set forth on sheets appended to this them, lead us to reverse the Presiding age control of the peak demands by dis­ order (Appendices 'A and B) the costs Examiner and to find that the use of CD tribution company customers either of service, classified to demand and com­ rate form for the future is just and rea­ thorugh construction and use of peak­ modity, which we find to be proper upon sonable under the circumstances of this shaving facilities or through use of other evidence of record. Appendix A shows case. means available to them. Since distri­ the cost of service based upon the year We have had recent occasion In the bution company customers will be obli­ 1954, actual. In arriving at the cost of Matter of United Fuel Gas Company, gated to pay for 90 percent of their con­ service in Appendix B we used the same et al., Docket No. G-2451 et al., order tract demands over the period of the allocation and classification procedures issued May 11, 1956, to pass upon appli­ contract term they will be encouraged that form the basis for the cost of service cation of the CD rate form to the sales not only to keep their load factors high, for the year 1954, actual. However, Ap­ of natural gas by United Fuel and Cen­ but also to avoid year-to-year fluctua­ pendix B reflects pro forma changes from tral Kentucky to their distribution com­ tions in requirements from Ohio Fuel.* the actual cost experience. pany customers. The significant factors To the extent economical, the customers Examination of Appendix B will show leading to our approval of the CD rate will stabilize peak demands from Ohio the extent to which the allocation and form as applied to the jurisdictional sales Fuel and Ohio Fuel will not be required classification we deem to be proper re­ of those affiliates of Ohio Fuel in the to absorb, through varying demand reve­ sult in a rate different from that pre­ Columbia Gas System are also present nues, the entire effect of year-to-year scribed by the Presiding Examiner. It in this case. fluctuations.5 At the same time, cus­ should be noted that the total cost of The primary factor, as disclosed in the tomers companies are afforded consider­ service allocated to jurisdictional custo­ record, which influences our decision is able protection in the provision of the mers which we find to be proper, the effect of the tremendous increase in tariff permitting them to reduce their $21,127,008, varies slightly from the cost the space-heating load by ultimate con­ contract demands in two successive 5 of service of $21,157,044 used by the Pre­ sumers purchasing gas from the distri­ percent stages as a matter of right. *The siding Examiner. This adjustment re­ bution company customers of Ohio Fuel. tariff further provides that the contract sults from our exclusion of $16,388 As an example, the record shows that quantity can be reduced by additional Documentary Stamp Tax expense from the space-heating saturation on Day­ amounts provided the capacity so re­ the cost of service and from the effect of ton’s system was approximately 77 per­ leased can be otherwise used. our different cost classification. The cent in Í955, representing 110,800 Further, the uniform application of Presiding Examiner included the Docu­ residential customers. This compares CD rate form will tend to reduce dis­ mentary Stamp Tax likening it to a with a 21 • percent saturation in 1946. crimination among customers. A rate financing cost. Exception was properly The peak-day requirements of Dayton, form geared to average demand would taken by Dayton on the ground that as shown by actual experience and as work to the advantage of the low-load FPC Balance Sheet Account No. 140, projected into the future, illustrate a factor customer. Under the fluctuating FPC Balance Sheet Instruction No. 6C, comparable increase. The same condi­ weather conditions shown in this record and Income Account No. 53T of our Uni­ tion pertains to the rate of growth of to exist, we can anticipate that without form System of Accounts prohibit its the space-heating load of other whole­ the control afforded by the CD rate form inclusion as an expense item in the cost sale customers of Ohio Fuel. this discrimination would be aggravated of service. Therefore, we have reduced It is characteristic of this space-heat­ in the future. the cost of service by $16,388 and made ing load to fluctuate widely with Rate level. Since Ohio Fuel’s proposed the consequent adjustments. changing weather conditions. These rate increase went into effect subject to The only other item relating to cost fluctuations are not only winter peaks refund as of March 1, 1954, our prescrip­ of service which merits specific mention but, more importantly, year-to-year var­ tion of just and reasonable rates relates here is the inclusion of $126,979, reflect­ iations in peak loads. When demand back to that date. Of course, the rate ing one-half the increase in the 1955 revenues accruing to Ohio Fuel are made prescribed for periods prior to thé effec­ property tax over the 1954 property tax.- dependent upon actual purchases by the tive date of this order will determine the This is an adjustment for known in­ wholesale customers which, in turn, are amount of refunds to be paid to the creases over the 1954 test year. The dependent upon the weather, it is clear jurisdictional customers.8 Presiding Examiner included this ad­ that Ohio Fuel will be subjected to a In order to prescribe the just and rea­ justment proposed by Ohio Fuel in its ex­ ‘‘feast or famine” recovery of costs col­ sonable rates for the refund period and hibit showing the cost of service. Since lected through demand charges. As the for the future it is necessary, of course, it reflects a known cost, we find that its space-heating load with consequent to determine the proper amount includ- inclusion is reasonable. high-peak requirement increases, the In determining the break-down be­ year-to-year fluctuations in recovery of *It should be noted that although only tween demand and commodity, there is costs collected through demand charges 26 percent (by revenue) of Ohio Fuel’s sales one item which we would classify in a would become more accentuated by the are made at wholesale, they are, nevertheless, significant. See Appendices A and B. manner different from the Presiding Ex­ weather conditions. In our judgment, a * A CD rate with a short-term commitment, aminer. Under Purchased Gas Ex­ rate form which does not recognize this such as a one-year contract, would not pro­ situation and bring a measure of stabil­ pense—purchases from Texas Eastern vide long-term stability in demand revenues. Transmission Corporation—we classify ity in recovery of those costs collected 6 In time the reduction of the year-to-year fluctuations in Ohio Fuel’s demand revenues all demand charges to the demand com­ ‘ Pursuant .to Ohio Fuel’s proposal, Juris­ should reflect a salutary effect on future ponent. The Presiding Examiner in­ dictional customers taking less than 5,000 financing by the Columbia Gas System cluded the demand charges in the rate for Mcf on peak day are eligible to purchase which, in turn, will also redound to the bene­ gas purchased from Texas Eastern in under the SmaU General Service (SGS) Rate fit of Ohio Fuel’s wholesale customers. the commodity component. This dif­ Schedule containing a straight commodity 8 It should be noted that all rates pre­ rate. Twenty of the twenty-five jurisdic­ scribed herein are based on costs of service ference in classification results in a sig­ tional customers are eligible for service under which have not yet been finally determined nificant shift of costs from the com­ this rate schedule Instead of under the CDS— because rate case proceedings of Ohio Fuel’s modity to the demand side. The amount 1 Rate Schedule with its contract demand suppliers have not been finally concluded. involved is $6,296,373 prior to adjust­ rate form. Our findings with respect to the Hence, the rates prescribed herein are con­ rate level of the SGS Rate Schedule are set tingent upon refunds from suppliers of Ohio ments to gas placed in and withdrawn forth in a later portion of this order. Fuel. from storage. 5022 NOTICES The record shows that during the test is not sufficient evidence in the record to cents rate for the first portion of the year purchases from Texas Eastern were show the effect our approval of the CD refund period and proposes use of the made at significantly less than 100 per­ rate form will have upon the elements of $2.00/33.38 cents rate for that period. cent load factor. Under this situation, risk affecting rate of return for the For the remainder of the refund period we come to a different decision from the future. Therefore, we shall reopen the Ohio Fuel would abandon the underlying Presiding Examiner. The fact that Ohio record in this proceeding for the purpose rate for a rate of $1.75/30.96 cents under Fuel is purchasing jointly with its affl- of taking additional rate of return evi­ the CD rate form. iate, The Manufacturers Light and Heat dence, including the effect of the appli­ In prescribing rates for the refund pe­ Company, does not eliminate the effect cation of the CD rate form to sales by riod, it should be kept clearly in mind of Texas Eastern’s demand charges to Ohio Fuel to its resale customers. that it is the dollar amount received by Ohio Fuel. We find that the demand Ohio Fuel and United Fuel are affil­ Ohio Fuel that is important—the rate charges in the cost of gas purchased from iates, both part of the Columbia Gas level, not the rate form. As the record Texas Eastern are properly classified as System. In many aspects, the elements shows (compare Appendix A with Ap­ a demand element in Ohio Fuel’s cost of entering into the determination of rates pendix B), a substantially different cost service. of return of both affiliates are common situation could be expected to prevail With respect to two items Ohio Fuel because both Ohio Fuel and United Fuel after the December 1954 billing month takes exception to the classification by are dependent upon the Columbia Gas as compared with the costs actually in­ the Presiding Examiner. These are System for their financial requirements. curred during the ten-month period in Depreciation, Return and Taxes relating It is appropriate, therefore, since this 1954. Therefore, we have prescribed to its LPG Plant and Depreciation, Re­ same issue is involved in the proceedings different rates for the two parts of the turn and Taxes relating to its own pro­ In the Matter of United Fuel Gas Co. refund period. The two rates result in duction. The first, the Presiding Ex­ et al., Docket No. G-2451 et al., sched­ a rate level closely approximating costs aminer classified entirely to demand; the uled for hearing on July 5, 1956, that of service and at least equal to the con­ second, entirely to commodity. We agree the record in this Docket No. G-2281 be tingent level of the underlying $2.00/ with each classification. The record consolidated with those proceedings for 32.75 cents rate. shows that the LPG plant is used for the purpose of taking evidence with re­ As shown in Appendix A, the cost of peaking purposes. We find that all costs spect to the reasonable rate of return service for the year 1954, actual, allo­ of LPG production, including over-head for Ohio Fuel for the future to be effec­ cated to jurisdictional customers is costs, should be classified to demand. tive prospectively from the date our $20,504,805. Our classification of costs We also uphold the Presiding Examiner order issues upon conclusion of the re­ results in $5,759,992 in demand and in finding that there is no justification opened proceeding. $14,744,813 in commodity. The result­ in the record for classifying part of Ohio With the adjustments to the wholesale ant balanced unit rate, on an average Fuel’s own production costs to demand. cost of service mentioned above and the demand basis, is $2.08 per Mcf of demand Its own production, serving a commodity change in classification of costs, we ar­ and 31.52 cents per Mcf of commodity. function like that of gas purchased in rive at a total cost of service for whole­ We prescribe this rate to apply to Ohio the field on a straight commodity basis, sale sales for the year 1954, pro forma, of Fuel’s jurisdictional sales for the period should be classified entirely to com­ $21,127,008. (Appendix B). This is March 1, 1954, through the December modity. classified $5,967,176 to demand and $15,- 1954 billing month. The Presiding Examiner used a 6lU 159,832 to commodity. Using the billing Appendix B shows the cost of service percent rate of return in determining units based upon wholesale sales for the for the year 1954, pro forma, to be rates both for the refund period and for year 1954, as shown on Ohio Fuel’s Ex­ $21,127,008, classified $5,967,176 to de-. the future. In its exceptions, Dayton hibit No. 33, we arrive at a rate for the mand and $15,159,832 to commodity. On argues for a 5i4 percent rate of return future of $1.56 per Mcf of demand and an average demand basis this results in for the refund period but does not ex­ 32.45 cents per Mcf of commodity on a a balanced unit rate of $2.15 per Mcf cept to the use of the 6% percent rate of contract demand basis. We find that of demand and 32.43 cents per Mcf of return for the future. Dayton presented this rate which covers Ohio Fuel’s whole­ commodity. We prescribe this rate as no rate of return evidence in support of sale cost of service, including a 6% per­ applicable to the volumes sold during the its position. cent rate of return, is the just and remainder of the refund period. In com­ For the refund period, from March 1, reasonable rate for the future, to take bination with the $2.08/31.52 cents rate 1954, through the June 1956 billing effect as of the July 1956 billing month. for the ten months in 1954, it will re­ month, the substantial evidence sup­ Calculation of the rates to be pre­ sult in a rate level for the entire refund ports a 6J4 percent rate of return for scribed for the refund period presents an period at least equal to the underlying Ohio Fuel. Importantly, the 61/* per­ added problem in that refunds from sup­ $2.00/32.75 cents rate after adjustments. cent rate of return is coupled with bill­ pliers of Ohio Fuel have yet to be deter­ Both of the foregoing rates for the refund ing on an average demand basis. We mined in several proceedings. We stated period are subject to reductions giving have previously held in our Opinion No. in our order issued December 22,1954, in effect to any reductions in the respective 273 in Dockets Nos. G-1786 and G-1965, Dockets Nos. G-1786 and G-1965, that a costs of service arising from refunds issued July 26, 1954, that a rate of re­ $2.00/33.38 cents rate, as adjusted by which Ohio Fuel has received or may turn of 6 lA percent was appropriate for possible refunds from Ohio Fuel’s sup­ receive from its suppliers and which are Ohio Fuel for the refund periods there pliers, should be the underlying rate for allocable to the refund period here involved. The reasons for approving a this proceeding.7 The Presiding Exam­ involved. 6i4 percent rate of return for the refund iner would divided the refund period into Another matter remains for our con­ periods involved in the earlier proceed­ three parts: (1) From March 1, 1954, sideration. Although the initial decision ings are equally applicable to the refund through the December 1954 billing of the Presiding Examiner does not deal period here. Of particular note is the month; (2) the January 1955 billing with this issue, Ohio Fuel proposes to fact that in both instances we approve month through the December 1955 bill­ the use of the average demand form of make a Small General Service (SGS) ing month; and (3) the January 1956 Rate Schedule available to wholesale cus­ billing as distinguished from the con­ billing month to the effective date of this tomers, the maximum daily takes of tract demand rate form. order (for which he would prescribe the We have recognized in our recent which do not exceed 5,000 Mcf, on an order In the Matter of United Fuel* Gas same rate as that for the future). For optional basis with the CD rate. Ohio Co. et al., Docket No. G-2451 et al., that the first period he would prescribe a rate Fuel proposes a straight commodity rate approval of the CD rate form will tend of $1.52/34.90 cents; for the second pe­ under the SGS schedule of 48 c e n t s per to shift the risk of weather fluctuations riod, $1.60/35.76 cents; and for the third Mcf, which is equivalent to its CD rate to the distribution company customers. period, $2.00/33.38 cents. In its excep­ at a 35 percent load factor. Therefore, we stated we would give con­ tions, Ohio Fuel objects to the $1.52/34.96 We find that a 48-cent rate would im­ sideration to that shift in the risk in de­ pose an undue burden upon the small termining the rate of return in the rate ’We take administrative notice that on wholesale customers which will be eli­ May 9, 1956, Ohio Fuel tendered for filing level stage of those proceedings. While revised tariff sheets which would reduce the gible for this service. The record shows the record here supports a rate of return $2.00/33.38 cents tentative rate to $2.00/32.7$ that a straight commodity rate for all of 6i4 percent for the refund period on cents; Further downward adjustments may wholesale customers would be slightly in an average demand billing basis, there be anticipated. excess of 45 cents per Mcf (see Appendix Friday, J u ly 6, 1956 FEDERAL REGISTER 5023 B). However, if the large wholesale cus­ June 1956 billing month, a demand taking additional evidence concerning tomers which would not be eligible for charge of $2.15 per Mcf, and a commodity the effect upon rate of return of Ohio service under the SGS Rate Schedule are charge of 32.43 cents per Mcf. Fuel of our approval of the application excluded from the computation, the rate (7) Subject to the limitations imposed of the CD rate form to the sales to Ohio would average slightly under 45 cents per by the ultimately effective underlying Fuel’s resale customers. For the pur­ Mcf (44.865 cents per Mcf). The 48-cent rate set forth in our order issued Decem­ pose of taking this additional evidence rate proposed by Ohio Fuel would impose ber 22, 1954, in Dockets Nos. G-1786 and this proceeding should be consolidated too heavy a burden upon the small cus­ G-1965, Ohio Fuel should refund to each with the hearing In the Matter of United tomer which is less able to protect itself of its customers with interest at 6 per­ Fuel Gas Co. et al., Docket No. G-2451 through installation of peak-shaving cent (6%) per annum, from the date of et al., commencing on July 5, 1956. equipment. We find 45 cents per Mcf payment to Ohio Fuel to date of refund, The Commission orders: to be the just and reasonable rate for the excess of the total amounts charged (A) Dayton’s motion to dismiss filed service under the SGS Rate Schedule to from March 1, 1954, under the rates in June 1,1956, is hereby denied. be effective prospectively. effect subject to refund, over the total (B) The rates and charges contained Consistent with our decision herein, amount which would have been charged in Ohio Fuel’s Second Revised Volume customer companies should be permitted for sales to such customers under the No. 1, as filed on September 18, 1953, and to negotiate new contract quantities un­ rates found just and reasonable in Find­ modified pursuant to the order of March der the contract demand rate form. ing (6) above, for the respective portions 26, 1954, which were in effect subject to For the reasons stated above and based of the refund period. refund from March 1, 1954, are unjust upon consideration of the substantial (8) Ohio Fuel should refund to its and unreasonable and are hereby dis­ evidence of the entire record, the Com­ wholesale custpmers on an equitable allowed. mission further finds: basis the proper part of any reductions in (C) Within 45 days from the effective (1) Ohio Fuel owns and operates an costs of service as used herein, received date of this order, Ohio Fuel shall file integrated natural gas system located in by it as refunds or otherwise which are revised tariff sheets to its FPC Gas Tariff the State of Ohio through which it not already reflected in rates herein de­ consistent with this order, satisfactory transports and sells natural gas for re­ termined, which it already has received to the Commission, reflecting rates as sale in interstate commerce, and is a or may receive in the future from its . follows: natural-gas company within the mean­ suppliers, as a result of disposition of ing of the Natural Gas Act. proceedings involving the rates of its sup­ Teriod Demand Com­ (2) The granting of Dayton’s motion pliers applicable to the period from modity to dismiss the proceedings with respect March 1,1954. to the change in rate form as applied to (9) Ohio Fuel should file revised tariff Mar. 1, 1954, through the Decern- C en ts her 1954 billing month (average sales to Dayton would not be. in the pub­ sheets reflecting rates and charges-, to be demand basis)...... $2.08 31. 52 lic interest and should be denied. effective commencing with the July 1956 January 1955 billing month (3) The rates and charges contained billing month, of $1.56 per Mcf of de­ through the June 1956 billing month (average demand basis).. 2.15 32.43 in Ohio Fuel’s FPC Gas Tariff, Second mand and 32.45 cents per Mcf of com­ July 1956 billing month and the Revised Volume No. 1, as filed on Septem­ modity, based upon a contract demand future (contract demand rate form and in conformity with ber 18, 1953, and as modified by revised rate form including the modifications exhibit No. 38)...... 1.56 32.45 tariff sheets permitted to be filed by proposed by Ohio Fuel in Exhibit No. 38 July 1956 billing month (SGS rate Commission order issued March 26,1954, to this proceeding. .45 are unjust and unreasonable and should (10) Ohio Fuel should file revised be disallowed from March 1, 1954, the tariff sheets reflecting rates and charges, (D) Subject to the limitations im­ date upon which the filing first became to be effective commencing with the July posed by the ultimately effective under­ effective subject to a corporate under­ 1956 billing month, of 45 cents per Mcf on lying rate as set forth in the order is­ taking to refund. a straight commodity basis to be availa­ sued December 22, 1954, in Dockets Nos. (4) Continued billing by Ohio Fuel ble on an optional basis to small general G-1786 and G-1965, Ohio Fuel shall re­ under the rate form previously pre­ service customers, the maximum daily fund to each wholesale customer, with scribed does not give sufficient firmness takes of which do not exceed 5,000 Mcf. interest at six percent (6%) per annum to the demand revenues nor provide long­ (11) Ohio Fuel should make refunds from the date of payment to Ohio Fuel term commitments by the customers, and file changes in rates prescribed in to the date of refund by it, the difference both of which are essential for continued Finding (9) above in the event that between the amounts which would have financial stability of Ohio Fuel; nor does United Fuel Gas Company and Pan­ been collected by Ohio Fuel under the such billing encourage use of peak shav­ handle Eastern Pipe Line Company, or rates found herein to be just and rea­ ing by the customers. Therefore, fur­ either of these, are required by any final sonable and set forth in (C) above and ther use of this rate form, prospective orders of the Commission in Dockets the amounts actually received. Ohio from the July 1956 billing month, would Nos. G-2451, G-2506, and G-5475, to Fuel shall bear all costs of refunding. hot be in the public interest. make refunds to Ohio Fuel or to make (E) Ohio Fuel shall refund to its (5) Continued billing by Ohio Fuel at any reductions in the rates applicable wholesale customers, on an equitable the rate level prescribed in Dockets Nos. to their sales of natural gas to Ohio Fuel; basis to be approved lay the Commission, G-1786 and G-1965 would result in rates Ohio Fuel should also make refunds and the proper part of any reductions in pur­ for the future which would not return to file changes in rates prescribed in Find­ chased gas costs used in costs of service Ohio Fuel all costs associated with ren­ ing (9) above at such time as Texas Gas herein received by it as refunds or other­ tin g service to its jurisdictional cus­ Transmission Corporation gives effect to wise which are not already reflected in tomers thus impairing Ohio Fuel’s the Commission’s order in Docket No. the rates herein determined and which financial ability to continue service. G-2017 and Texas Eastern Transmission it already has or may receive in the fu­ Therefore, continued billing at the rate Corporation gives effect to the Commis­ level prescribed in Dockets Nos. G-1786 sion’s order in Docket No. G-1964. ture from its suppliers. Ohio Fuel shall and G-1965 would not be in the public (12) In the event that the corporate make refunds applicable to sales for the interest. income tax rate for the year 1956 is fixed period beginning with March 1, 1954, to (6) For purposes of refund from at less than the current rate of fifty-two reflect any reductions in costs of gas pur­ March 1, 1954, through the June 1956 percent (52%) used in the Ohio Fuel chased as used herein, which reductions billing month, the rates and charges (on cost-of-service statements, Ohio Fuel would result from the disposition of pro­ the average demand basis) set forth shall file changes in its cost of service ceedings involving rates of its suppliers. herein are just and reasonable for the occasioned by the reduction of the Fed­ Ohio Fuel shall file revisions of its tariff Periods noted: eral Income Tax rate, and such changes sheets reflecting such refunds in the (i) For the period March 1, 1954, through the December .1954 billing shall have the same effective date as the commodity component of its rates. jhonth, a demand charge of $2.08 per mission the amount of refunds to each (F) Within 45 days from the effective Mcf and a commodity charge of 31.52 date upon which such tax rate reduction date of this order Ohio Fuel shall report, cents per Mcf; becomes effective. in writing and under oath, to the Corn- (ii) For the period beginning with the (13) The record in this proceeding customer for each of the periods, March January 1955 billing month through the should be reopened for the purpose of 1, 1954, through the December 1954 bill- 5024 NOTICES ing month and the January 1955 billing Docket No. G-2451 et al., In the Matter [Docket No. G-3822 etc.] month through the June 1956 billing of United Fuel Gas Co. et al., commenc­ Oil Associates, Inc., et al. month. ing on July 5, 1956. (G) For the purpose of taking addi­ Issued: June 29, 1956. NOTICE OF APPLICATIONS AND DATE OF tional evidence referred to in finding HEARING By the Commission. (13), the record in this proceeding shall Take notice that each of the Appli­ be reopened and this proceeding shall [seal] Leon M. F uquay, cants listed below has filed an applica­ be consolidated with the hearing in Secretary. tion for a certificate of public conven­ Appendix A—T he Ohio F uel Gas Company Wholesale Cost of Service, Y ear 1954—Actual ience and necessity pursuant to section 7 (c) of the Natural Gas Act, authorizing Total Demand Commodity such Applicant to continue to sell nat­ ural gas subject to the jurisdiction of Produced and purchased gas: the Commission, all as more fully rep­ Gas purchased: $16,624,510 $3,068,460 $13,556,050 resented in the respective applications 4,648,962 1,310,000 3,338,962 which are on file with the Commission 21,407,679 6,296,373 15, 111, 306 / 6,842,835 and open for public inspection. These \ 2,563,043 1,950,376 7,455,502 matters should be consolidated and dis­ 1,028,104 1,028,104 posed of as promptly as possible under 1,894,864 1,894,864 the applicable rules and regulations and 55,009,997 12,625,209 42,384, 788 to that end: (4,290,379) (984,642) (3,305,737) Take further notice that, pursuant to 50,719,618 11,640,567 39,079,051 the authority contained in and subject 232,209 232,209 • (206,741) (206,741) to the jurisdiction conferred upon the Federal Power Commission by sections 7 50,745,086 11,640,567 39,104,519 and 15 of the Natural Gas Act, and the 50,428 50,428 Commission’s Rules of Practice and Pro­ 50,795, 514 11,640, 567 39,154,947 cedure, a hearing will be held on the 1,690 1,690 12,150 .12,150 date and at the place hereinafter stated, 13,137 13,137 concerning the matters involved in and 4,117 4,117 the issues presented by such appfica- 50,826,608 . 11,640,567 39,186,041 tions: Provided, however, That the Com­ 4,981,727 4,981,727 mission may, after a non-contested 36,479 36,479 hearing, dispose 'of the proceedings pur­ 55,844,814 11,640,567 44,204,247 302,446 302,446 suant to the provisions of § 1.30 (c) (1) 7,835,250 3,824,902 4,010,348 of the Commission’s rules of practice and 12,555,963 5,990,502 6,565,461 procedure. 76,538,473 21,758,417 54,780,056 Protests or petitions to intervene may 26.24 26.68 be filed with the Federal Power Com­ 20,324,728 5,709,409 14,615,319 mission, Washington 25, D. C., in accord­ 23,430 6,581 16,849 ance with the rules of practice and 156,647 44,002 112,645 procedure (18 CFR 1.8 or 1.10) not less 20,504,805 5,759,992 14,744,813 than ten days before the date of hear­ ing. Failure of any party to appear at Mcf billing units at 14.73# (data from Company Ex. No. 33)______2,774,192 46,756,900 $2.076277 31.535050 and participate in the hearing shall be $2.08 31. 520 construed as waiver of and concurrence in omission herein of the intermediate Appendix B—The Ohio Fuel Gas Company Wholesale Cost of Service, Y ear 1954—P ro F orma decision procedure in cases where a re­ quest for waiver is made. Under the pro­ T otal Demand Commodity cedure herein provided for, unless otherwise advised, it will be unnecessary Produced and purchased gas: - for Applicants to appear or be repre­ Gas purchased $18,752,400 $3,887,233 $14,865,167 sented at the hearing. 21,528,257 6,296,373 15,231,884 The dockets, Applicants and material 9,382,257 1,950,102 7,432,155 4,779,281 1,260,000 3,519,281 averments in applications to which refer­ 1,042,401 1,042,401 ence is made above are as follows: Subtotal.______55,484, 596 13,393,708 42,090,888 Docket No.; Name and Address; Filing Datej The Preston Oil Co______/ 53,411 53,411 Gas Field; and Purchaser 1,841,453 1,841,453 Panhandle Eastern Pipe Line Co.—Rural______4,604 4,604 Gr-3822; Oil Associates, Inc. Reading, Pa.; 9-30-54; Weesatclie,' Goliad County, Tex.; 57,384,064 13,393,708 43,990,356 Texas Eastern Transmission Corporation. Gas placed in storage—Cr...... ~ ______(13,626,601) G-3823; General Crude Oil Company, Gas withdrawn bom storage— Dr______9,133,636 Houston, Tex.; 9-30-54; Keyes, Cim arron N et gas planed in storage—Cr ...... County, Okla.; Colorado Interstate Gas Com­ (4,492,965) (1,084,602) (3,408,363) pany. Other expenses...... ______. . . 5,053,801 5,053,801 G-4Q84; Delta Drilling Company, M. Ascher and M. Ascher Trustee, Tyler, Tex.; 10-4-54; Total produced and purchased gas______57,944,900 12,309,106 45,635,794 L-P gas air...... 1...... " ...... 310,258 310,258 Bill Hill, Jefferson County, Tex.; Texas Gas Underground storage....______7,929,157 3,871,543 4,057,614 Corporation. Transmission. ______. ... 12,676,311 6,049,465 6,626,846 G-4111; Adams & Haggarty, a partnership; The City National Bank of Houston, Execu­ Total______78,860,626 22,540,372 56,320,254 Percent applicable to wholesale sales ... 26.24 26.68 tor of Ernest Adams; Louise Dickson Adams; George A. Schilling; George T. Schilling; Amoimt applicable to wholesale sales _ 20,940,838 5,914,594 15,026. 244 Nancy Schilling Cheney; Richard John Rate case expense______25,000 7,061 17,939 Schilling; William G. Lerchen, Jr.; R obert J. State excise tax______161,170 45,521 115,649 Byrnes; Alfred L. May; Milton P. McCaffrey; Total cost of service—wholesale sales _____ 21,127,008 6,967,176 15,159,832 Prank R. Dimond; H. T. Williams; N. O. Ginther; H. C. Warren; W. L. Ginther; Jam es M cf billing units at 14.73# (data from Company Ex. No. 33)____ 3,816,887 46,756,900 Unit costs______45.1848ÿ $1.56336 32.422660 Edward Adams and William McMillan, Unit rates______. ______450 $1.56 32.450 Houston, Tex.; 10-4-54; West Bill Hill, Jef­ (SGS) (C D) Unit costs (average demand basis) . _ ____ . $2.15096 32.422660 ferson County, Tex.; Texas Eastern Trans­ Balanced unit rates (average demand basis!______$2.15 32.430 mission Corporation. G—4776; Amerada Petroleum Corporation, [F. R. Doc. 56-5355; Filed, July 5,1956; 8:51 a. m.] Tulsa, Okla.; 11-9-54; South Lewisburg. Friday, J u ly 6, 1956 FEDERAL REGISTER 5025 Acadia and St. Landry Parishes, La.; Texas the plan approved by order dated June 3. The offering circular fails to de­ Northern Gas Corporation. 26, 1951 (File No. 54-184) be, and hereby scribe the method by which the securities G-6593; Watson Oil & Gas Company, Inc., is, approved, and said company be, and it are to be offered as required by Rule Jane Lew, W. Va.; 11-30-54; Murphy District, Eitchie County, W. Va.; Carnegie Natural hereby is, authorized to make payment of 504 (b) (4) ; Gas Company. such amounts thereof as have not 4. The offering circular fails to state in G-6594; Watson Oil & Gas Company, Inc.; already been paid: tabular form on the outside front covér 11-30-54; Union District, Marion County, W. page of the offering circular the price Va.; Equitable Gas Company. Fees Expenses to the public, underwriting commissions, G-6595; Watson Oil & Gas Company, Inc.; and proceeds to the issuer as to the secu­ 11-30-54; Cotftrt House District, Lewis Whitman, Ransom & Coulson.. $238,500.00 $4,391.72 rities covered by the notification and County, W. Va.; Equitable Gas Company. Bums, Blake & Rich______18.500.00 917.47 securities concurrently to be offered in G-6596; Watson Oil & Gas Company, Inc.; 30.000. 00 11-30-54; Washington and Union Districts, 10.000. 00 Canada, as required by Rule 504 (b) (5) ; Upshur County, W. Va.; Cumberland & Alle­ Moody’s Investors Service____ 19,952.29 5. The offering circular fails to dis­ gheny Gas Company. 12.500.00 close the respective amounts of proceeds J. P. Morgan & Co., Inc...... 29,885.82 (') G-6597; Watson Oil & Gas Company, Inc.; Expenses of registration of shares from the sale to be applied for each pur­ 11-30-54; Washington District, Upshur of Niagara Mohawk Power pose for which the net cash proceeds County, W. Va.; Cumberland & Allegheny Gas Corp. and South Jersey Gas Co 76,219. 62 from the sale of the securities are to be Company. Printing and related services---- 28,219.13 used, the priority of application of such G-6598; Watson Oil & Gas Company, Inc.; Miscellaneous expenses paid by 11-30-54; Court House District, Lewis 18,614.46 amounts, and the disposition of proceeds County, W. Va.; Cumberland & Allegheny Randolph Phillip's______— 50,000.00 (>) in the event that the proceeds are in­ Gas Company. 7,000.00 sufficient for the purposes stated; G-6599; Watson Oil & Gas Company, Inc.; 6. The offering circular fails to state, 11-30-54; Salt Lick District, Braxton County, 1 Included in fee. as required by Rule 504 (b) (7) and Sup­ W. Va.; Equitable Gas Company. plemental Instructions to Regulation D It is further ordered, That the applica­ referred to therein, the nature of issuer’s A public hearing will be held on the tion of Sheldon Preschel for the allow­ 30th day of July, 1956, beginning at 9:30 interest in the properties to be developed ance of a fee for services and the and the development which has occurred a. m., e. d. s. t., in a hearing room of the reimbursement, of expense be, and it Federal Power Commission, 441 G Street to date on or near the properties held ; hereby is, denied; and 7. Issuer has failed to file for the in­ NW., Washington, D. C., concerning the It is further ordered, That the appli­ formation of the Commission, as re­ matters involved in and the issues pre­ cation of the General Protective Com­ quired by the Supplemental Instructions sented by the above applications. mittee for Holders of Option Warrants for an interim allowance for reimburse­ to Regulation D, copies of pertinent re­ [sea l] Leon M. F uquay, ports and other data to support state­ Secretary. ment of expenses be, and it hereby is, ments made in the offering circular June 29,1956. denied, without prejudice to a further ap­ concerning geology and engineering ; plication for the allowance of such ex­ 8. The offering cirçular fails to include [F. R. Doc. 56-5357; Piled, July 5, 1956; penses at a later time. 8:51 a. m.] financial statements in appropriate form By the Commission. as required by Rule 504 (b) (10). B. That the offering circular is false [seal] Oval L. D uB ois* SECURITIES AND EXCHANGE and misleading in the following par­ Secretary. ticulars : COMMISSION [F. R. Doc. 56-5343; Filed, July 5, 1956; 1. In stating, “The most noted discov­ 8:48 a. m.] [Files Nos. 54-89, 54-184] eries of oil producing lands have usually been preceded by indications of oil or U nited Corp. gas seepages on, or very close to the ORDER REGARDING PAYMENT OF FEES AND [File No. 27-107] surface” ; EXPENSES 2. In characterizing gamma ray sur­ K ey O il & Gas (1955) Ltd. (N. P. L.) veys and aerial photography as “the J une 28, 1956. ORDER TEMPORARILY DENYING EXEMPTION, finest exploration methods obtainable The Commission' having by orders STATEMENTS OF REASONS THEREFOR, AND today”; dated November 29, 1944, and June 26, NOTICE OF OPPORTUNITY FOR HEARING 3. In stating that “oil of commercial 1951 approved amended plans filed by proportions is obtainable” upon drilling The United Corporation in the above J une 29,1956. to the so-called “lower Burrard Forma­ Proceedings pursuant to section 11 (e) I. Key Oil & Gas (1955) Ltd. (herein­ tion”; of the Public Utility Holding Company after referred to as the “issuer”), 800 4. In stating that according to many Act of 1935 and having in such orders Hall Building, 789 West Pender Street, experts the issuer’s property “could be reserved jurisdiction over the payment Vancouver, British Columbia, Canada, the more productive extremity of the of fees and expenses in connection with having filed with the Commission on May same formation producing oil in such such plans; 4, 1956, a Notification on Form 1-D re­ abundance 2,500 miles farther south in Applications for the allowance of fees lating to a proposed public offering of California” ; and reimbursements of expenses having not exceeding 300,000 shares of its 50 5. In stating that many years of ex­ ooen filed, public hearings having been cents par value stock at 30 cents per ploratory work and past experience to­ hold, a recommended decision having share, for the purpose of obtaining an gether with modern methods of geolog­ been filed by the Hearing Examiner and exemption from the registration require­ ical surveying “enable us to minimize exceptions thereto and briefs having been ments of the Securities Act of 1933 as risk and abortive effort and locate our nled, and the Commission having heard amended, pursuant to the provisions of drillings in the more logical places”; oral argument; and section 3 (b) thereof and Regulation D 6. In omitting to state in connection The Commission having considered the promulgated thereunder; and with promises of continuous and com­ record and having this day issued its II. The Commission having reasonable plete exploration of the properties the findings and opinion, on the basis of such cause to believe: estimated cost of such a program and the findings and opinion A. That the terms and conditions ofproposed method of financing it; ft is ordered, That the application of Regulation D have not been complied 7. In omitting to state that the State Randolph Phillips for the allowance of with in that: of Washington has issued a cease and a fee for services and the reimbursement 1. The Notification on Form 1-D, Item desist order against the issuer, making of expenses alleged to have been rendered 5, fails to disclose that Raymond Shaw and incurred in connection with the plan is an affiliate of the issuer; it illegal to sell or offer to sell the secur­ ^Proved by order dated November 29, 2. The non-resident officers and direc­ ities in that state until further order. 944 (Pile No. 54-89) be, and it hereby tors of the issuer failed to furnish the C. That the use of said offering cir­ ls> denied; Commission at the time of the filing of cular in connection with the offering of v further ordered, That the payment the Notification on Form 1-D consents the issuer’s securities would operate as y The United Corporation of the follow- to service of process required by Rule a fraud and deceit upon the purchasers fees and expenses in connection with 507 (a); of such securities. 5026 NOTICES It is ordered, Pursuant to Rule 509 of less than 100 percent nor more than Commission may grant exemption from the general rules and regulations under 102% percent of the principal amount) its rules as provided in Rules U-20 (a) the Securities Act of 1933, as amended, are to be determined by competitive bid­ and U-100, or take such other action as that the exemption under section 3 (b) ding. The bonds will be issued under it may deem appropriate. ai\d Regulation D be, and it hereby is and secured by the company’s outstand­ By the Commission. temporarily denied. ing Mortgage and Deed of Trust, dated Notice is hereby given that any person September 1, 1948, as heretofore sup­ [seal] Orval L. D uB ois, having any interest in the matter may plemented, and as to be further supple­ Secretary. file with the Secretary of the Commission mented by an Eighth Supplemental In­ [P. R. Doc. 56-5344; Piled, July 5, 1956; a written request for a hearing; that, denture to be dated August 1, 1956. 8:48 a.m.] within 20 days after receipt of such re­ Michigan Wisconsin also proposes, quest, the Commission will, or at any prior to or simultaneously with the issu­ time upon its own motion may, set the ance of the new bonds, to increase the matter down for hearing at a place to be authorized number of shares of its $100 [File No. 70-3482] designated by thé Commission for the par value common stock from 255,000 S tandard Shares, I nc. purpose of determining whether this or­ to 310,000, and to issue and sell to Ameri­ der of denial should be vacated or made can Natural, and American Natural pro­ ORDER PERMITTING DECLARATION REGARDING permanent, without prejudice however, poses to acquire, 60,000 additional shares PROPOSED CASH DISTRIBUTION OUT OF to the consideration and presentation of of Michigan Wisconsin’s authorized but CAPITAL SURPLUS additional matters at the hearing; and unissued common stock for a cash con­ J une 29, 1956. that notice of the time and place for said sideration of $6,000,000. Prior to the Standard Shares, Inc. (“Standard hearing will be promptly given by the purchase by American Natural of the Shares”), a registered holding company, Commission. additional shares of common stock, has filed a declaration pursuant to sec­ Michigan Wisconsin proposes to declare tion 12 (c) of the Public Utility Holding By the Commission. and pay American Natural a cash divi­ Company Act of 1935 (“act”) and Rule [seal] Orval L. D uBois, dend of $6,000,000. The effect of this U-46 promulgated thereunder regarding Secretary. dividend declaration and contempora­ a proposal by Standard Shares to make a neous purchase of stock is to convert cash distribution of $0.40 per share, in [F. R. Doc. 56-5342; Filed, July 5, 1956; $6,000,000 of retained earnings into com­ part out of earned surplus to the full 8:47 a. m.] mon stock. extent thereof which at May 31, 1956, Michigan Wisconsin has outstanding amounted to $178,857 and the balance $14,000,000 principal amount bf notes out of capital surplus which as of the due July 1, 1956, issued under a credit same date was $22,046,157, to each holder [Pile No. 70-3488] agreement heretofore approved by the of record on June 29, 1956, of its out­ M ichigan W isconsin P ipe Line Co. and Commission (File No. 70-3382) and has standing 1,430,000 shares of common American Natural Gas Co. obtained approval of a new credit agree­ stock. The fees and expenses to be in­ ment under which it could borrow up curred in connection with said distribu­ NOTICE OF FILING REGARDING PROPOSALS BY to $25,000,000 on short-term bank notes, tion are estimated not to exceed $1,500, SUBSIDIARY OF REGISTERED HOLDING COM­ of which $14,000,000 will be used to pay including counsel fees not in excess of PANY TO ISSUE AND SELL AT COMPETITIVE the outstanding notes due July 1, 1956 $500, which do not appear to be unrea­ BIDDING ADDITIONAL FIRST MORTGAGE (File No. 70-3483). The remainder will sonable. BONDS, TO INCREASE ITS AUTHORIZED be applied to the payment of costs of Notice of the filing of the declaration COMMON STOCK, AND TO ISSUE AND SELL construction, estimated at $12,500,000, of having been duly given in the manner ADDITIONAL COMMON STOCK; AND PRO­ needed additional facilities to enable prescribed by Rule U-23 and no hearing POSAL BY ^ PARENT TO ACQUIRE SUCH Michigan Wisconsin to deliver to its mar­ having been ordered by or requested of STOCK kets the additional gas which will be­ the Commission, and the Commission J une 29, 1956. come available upon completion of the finding that the applicable provisions of Notice is hereby given that Michigan new pipe line being constructed by Amer­ the act and the rules thereunder are sat­ Wisconsin Pipe Line Company (“Michi­ ican Louisiana Pipe Line Company, an isfied and that, as requested by declar­ gan Wisconsin”), a non-public-utility associate company. ant, the declaration should be permitted company, and its parent, American Applicants-declarants state that the to become effective upon issuance: Natural Gas Company (“American Michigan Public Service Commission It is ordered, Pursuant to the applica­ Natural”>, a registered holding com­ may be deemed to have jurisdiction over ble provisions of the act and the rules pany, have filed with this Commission, the proposed issuance of the securities and regulations thereunder, that said pursuant to the Public Utility Holding by Michigan Wisconsin; that an appli­ declaration be, and it hereby is, permit­ Company Act of 1935 (“act”), a joint cation for approval thereof will be filed ted to become effective forthwith, sub­ application - declaration regarding a with such commission, and a copy ject to the terms and conditions pre­ proposal by Michigan Wisconsin to issue thereof and of any order entered thereon, scribed by Rule U-24, and subject to the and sell $25,000,000 principal amount of will be filed as an amendment herein. It following additional terms and condi­ its first mortgage bonds, and 60,000 is further stated that, apart from the tions: shares of its $100 par value common foregoing, no regulatory authority other That Standard Shares shall: stock. Applicants-declarants designate than this Commission has jurisdiction (1) Notify its shareholders to what ex­ sections 6 (b), 9, 10, and 12 (f) of the over the proposed transactions. tent the payment is being made out of act and Rules U-43 and U-50 (a) (3) Notice is further given that any inter­ capital or unearned surplus; thereunder as applicable to the proposed ested person may, not later than July 19, (2) Notify its shareholders that the transactions. 1956, at 5:30 p. m., e. d. s. t., request in Commission’s action in permitting the All interested persons are referred to writing that a hearing be held on such declaration to become effective is not to the joint application-declaration on matters, stating the nature of his inter­ be construed as a determination by the file in the offices of the Commission for est, the reasons for such request, and the Commission that all or any portion of a statement of the transactions therein issues of fact or law raised by the appli­ such payment is or is not taxable to the proposed, which are summarized as cation-declaration which he desires to recipients pursuant to the provisions of follows: controvert, or he may request that he be the Internal Revenue Code; and Michigan Wisconsin proposes to issue notified if the Commission orders a hear­ (3) Disclose in all published financial and sell, subject to the competitive bid­ ing thereon. Any such request should statements the extent to which the pay­ ding requirements of Rule U-50, $25,- be addressed: Secretary, Securities and ment was made out of capital or un­ 000,000 principal amount of its First Exchange Commission, Washington 25, earned surplus. Mortgage Pipe Line Bonds,_percent D. C. At any time after said date the Series due 1976. The interest rate application-declaration, as filed or as it By the Commission. (which shall be a multiple of % of 1 may be amended, may be granted and [seal] Orval L. D uBois, percent and the price to be received by permitted to become effective as pro­ Secretary. the company for the bonds (which, ex­ vided in Rule U-23 of the rules and regu­ [F. R. Doc. 56-5345; Piled, July 5, 1956‘, clusive of accrued interest, shall be not lations promulgated under the act, or the 8:48 a. m.}