Page 20: of Maritime Reporter Magazine (May 2000)

Legal Beat

Congressional Maritime Legislative Initiatives In 2000

The year 2000 has enjoyed special sig- nificance as a transition year bridging two centuries. Similarly it has signifi- cance with U.S. lawmakers for the Sec- ond Session of the 106th Congress. As the last year of the currently elected

Congress, this year anticipates action on a series of pending legislative measures and yet to be introduced proposals affecting the maritime industry. Specifi- cally tax-related legislation and mar- itime policy-related legislation could be addressed.

The following is a sampling of possi- ble changes in the law:

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I. Maritime-related Tax Legislation:

There are several tax-related provi- sions that could be considered. One of the main bills emphasizing maritime tax issues has been introduced in the House by Rep. Jim McCrery (R-LA) as H.R. 3225 and in the Senate by Sen. John

Breaux (D-La.) as S. 1858. These bills include such measures as:

A. Capital Construction Fund

Program. The McCrery/Breaux legisla- tion would expand the Capital Construc- tion Fund (CCF) program to allow earn- ings from U.S.-flag, foreign-built ships to be deposited into a CCF for the con- struction of ships in the United States.

Qualified withdrawals from a CCF would continue to apply only to U.S.- built vessels and would be expanded to include vessels that operate between coastwise points of the United States.

Contributions to a CCF would no longer be treated as preference items under the alternative minimum tax for corpora- tions. Finally, owners of U.S.-flag ves- sels would be allowed to contribute to a

CCF the 50 percent ad valorem duty on foreign ship repairs that applies to pre- sent ships under 19 U.S.C. 1466.

B. Other tax-related provisions in the Breaux/McCrery bills:

Merchant mariners working aboard certain vessels would be covered by sec- tion 911 of the Internal Revenue Code, thus excluding up to $80,000 of the wages they earn while working in for- eign commerce.

The acquisition cost of a U.S.-flag ship would be deductible as an expense rather than being treated as a capital investment.

The alternative minimum tax for cor- porations would not apply to shipping companies owning a fleet of four or more U.S.-flag vessels.

The $2,000 tax deduction available to passengers in the domestic cruise trade would also be available to passengers aboard a U.S.-flag cruise vessel operat- ing between a U.S. port and a foreign port.

Equally as significant. Congressman

Duncan Hunter (R-Calif.) has intro- duced H.R. 3392, which provides vari- ous incentives for the development of a

U.S.-flag, U.S.-built cruise industry, including CCF coverage and expansion of the business entertainment tax deduc- tion.

The chances of enacting favorable tax provisions for the maritime industry are enhanced by the existence of other mar-

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