Collapse to view only § 53306. Recognition of gain for tax purposes
- § 53301. Definitions
- § 53302. Authority for construction reserve funds
- § 53303. Persons eligible to establish funds
- § 53304. Vessel ownership
- § 53305. Eligible fund deposits
- § 53306. Recognition of gain for tax purposes
- § 53307. Basis for determining gain or loss and for depreciating new vessels
- § 53308. Order and proportions of deposits and withdrawals
- Accumulation of deposits
- § 53310. Obligation of deposits and period for construction of certain vessels
- § 53311. Taxation of deposits on failure of conditions
- § 53312. Assessment and collection of deficiency tax
§ 53301. Definitions
(a)In General.—In this chapter:
(1)Construction contract.—The term “construction contract” includes, for a taxpayer constructing a new vessel in a shipyard owned by that taxpayer, an agreement between the taxpayer and the Secretary of Transportation for that construction containing provisions the Secretary considers advisable to carry out this chapter.
(2)New vessel.—The term “new vessel” means—
(A) a vessel—
(i) constructed in the United States after December 31, 1939, constructed with a construction-differential subsidy under title V of the Merchant Marine Act, 1936, or constructed with financing or a financing guarantee under chapter 537 or 575 of this title;
(ii) documented or agreed with the Secretary to be documented under the laws of the United States; and
(iii)(I) of a type, size, and speed that the Secretary determines is suitable for use on the high seas or Great Lakes in carrying out this subtitle, but not less than 2,000 gross tons or less than 12 knots speed unless the Secretary certifies in each case that a vessel of lesser tonnage or speed is desirable for use by the United States Government in case of war or national emergency; or(II) constructed to replace a vessel bought or requisitioned by the Government; and
(B) a vessel reconstructed or reconditioned for use only on the Great Lakes, including the Saint Lawrence River and Gulf, if the Secretary finds that the reconstruction or reconditioning will promote the objectives of this subtitle.
(b)Additional Tax-Related Terms.—Other terms used in this chapter have the same meaning as in chapter 1 of the Internal Revenue Code of 1986 (26 U.S.C. ch. 1).
(Pub. L. 109–304, § 8(c), Oct. 6, 2006, 120 Stat. 1587.)
§ 53302. Authority for construction reserve funds
(a)General Authority.—An eligible person under section 53303 of this title may establish a construction reserve fund for the construction, reconstruction, reconditioning, or acquisition of a new vessel or for other purposes authorized by this chapter.
(b)Application of Certain Laws and Regulations.—The fund shall be established, maintained, expended, and used as provided by this chapter and regulations prescribed jointly by the Secretary of Transportation and the Secretary of the Treasury.
(Pub. L. 109–304, § 8(c), Oct. 6, 2006, 120 Stat. 1587.)
§ 53303. Persons eligible to establish funds
A construction reserve fund may be established by a citizen of the United States that—
(1) is operating a vessel in the foreign or domestic commerce of the United States or in the fisheries;
(2) owns, in whole or in part, a vessel being operated in the foreign or domestic commerce of the United States or in the fisheries;
(3) was operating a vessel in the foreign or domestic commerce of the United States or in the fisheries when it was bought or requisitioned by the United States Government;
(4) owned, in whole or in part, a vessel being operated in the foreign or domestic commerce of the United States or in the fisheries when it was bought or requisitioned by the Government; or
(5) had acquired or was having constructed a vessel to operate in the foreign or domestic commerce of the United States or in the fisheries when it was bought or requisitioned by the Government.
(Pub. L. 109–304, § 8(c), Oct. 6, 2006, 120 Stat. 1587.)
§ 53304. Vessel ownership
In this chapter, a vessel is deemed to be constructed or acquired by a taxpayer if constructed or acquired by a corporation when the taxpayer owns at least 95 percent of each class of stock of the corporation.
(Pub. L. 109–304, § 8(c), Oct. 6, 2006, 120 Stat. 1588.)
§ 53305. Eligible fund deposits
A construction reserve fund may include deposits of—
(1) the proceeds from the sale of a vessel;
(2) indemnities for the loss of a vessel;
(3) earnings from the operation of a documented vessel and from services incident to the operation; and
(4) interest or other amounts accrued on deposits in the fund.
(Pub. L. 109–304, § 8(c), Oct. 6, 2006, 120 Stat. 1588.)
§ 53306. Recognition of gain for tax purposes
(a)Definitions.—In this section, the terms “net proceeds” and “net indemnity” mean the sum of—
(1) the adjusted basis of the vessel; and
(2) the amount of gain the taxpayer would recognize without regard to this section.
(b)Recognition of Gain.—In computing net income under the income or excess profits tax laws of the United States, a taxpayer does not recognize a gain on the sale or the actual or constructive total loss of a vessel if the taxpayer—
(1) deposits an amount equal to the net proceeds of the sale or the net indemnity for the loss in a construction reserve fund within 60 days after receiving the payment of proceeds or indemnity; and
(2) elects under this section not to recognize the gain.
(c)When Election Must Be Made.—
(1)In general.—Except as provided in paragraph (2), the taxpayer must make the election referred to in subsection (b) in the taxpayer’s income tax return for the taxable year in which the gain was realized.
(2)Receipt after taxable year.—If the vessel is bought or requisitioned by the United States Government, or is lost, and the taxpayer receives payment for the vessel or indemnity for the loss from the Government after the end of the taxable year in which it was bought, requisitioned, or lost, the taxpayer must make the election referred to in subsection (b) within 60 days after receiving the payment or indemnity, on a form prescribed by the Secretary of the Treasury.
(d)Effect of Statute of Limitation.—If the taxpayer makes an election under subsection (c)(2), and computation or recomputation under this section is otherwise allowable but is prevented by a statute of limitation on the date the election is made or within 6 months thereafter, the computation or recomputation nevertheless shall be made notwithstanding the statute if the taxpayer files a claim for the computation or recomputation within 6 months after the date of making the election.
(Pub. L. 109–304, § 8(c), Oct. 6, 2006, 120 Stat. 1588.)
§ 53307. Basis for determining gain or loss and for depreciating new vessels
Under the income or excess profits tax laws of the United States, the basis for determining a gain or loss and for depreciation of a new vessel constructed, reconstructed, reconditioned, or acquired by the taxpayer, or for which purchase-money indebtedness is liquidated as provided in section 53310 of this title, with amounts from a construction reserve fund, shall be reduced by that part of the deposits in the fund expended in the construction, reconstruction, reconditioning, acquisition, or liquidation of purchase-money indebtedness of the new vessel that represents a gain not recognized for tax purposes under section 53306 of this title.
(Pub. L. 109–304, § 8(c), Oct. 6, 2006, 120 Stat. 1589.)
§ 53308. Order and proportions of deposits and withdrawals
In this chapter—
(1) if the net proceeds of a sale or the net indemnity for a loss is deposited in more than one deposit, the amount consisting of the gain shall be deemed to be deposited first;
(2) amounts expended, obligated, or otherwise withdrawn shall be applied against the amounts deposited in the fund in the order of deposit; and
(3) if a deposit consists in part of a gain not recognized under section 53306 of this title, any expenditure, obligation, or withdrawal applied against that deposit shall be deemed to be a gain in the proportion that the part of the deposit consisting of a gain bears to the total amount of the deposit.
(Pub. L. 109–304, § 8(c), Oct. 6, 2006, 120 Stat. 1589.)
Accumulation of deposits
For any taxable year, amounts on deposit in a construction reserve fund on the last day of the taxable year, for which the requirements of section 53310 of this title have been satisfied (to the extent they apply on the last day of the taxable year), are deemed to have been retained for the reasonable needs of the business within the meaning of section 537(a) of the Internal Revenue Code of 1986 (26 U.S.C. 537(a)).
(Pub. L. 109–304, § 8(c), Oct. 6, 2006, 120 Stat. 1589.)
§ 53310. Obligation of deposits and period for construction of certain vessels
(a)Application of Sections 53306 and 53309.—Sections 53306 and 53309 of this title apply to a deposit in a construction reserve fund only if, within 3 years after the date of the deposit (and any extension under subsection (c))—
(1)
(A) a contract is made for the construction or acquisition of a new vessel or, with the approval of the Secretary of Transportation, for a part interest in a new vessel or for the reconstruction or reconditioning of a new vessel;
(B) the deposit is expended or obligated for expenditure under that contract;
(C) at least 12.5 percent of the construction or contract price of the vessel is paid or irrevocably committed for payment; and
(D) the plans and specifications for the vessel are approved by the Secretary to the extent the Secretary considers necessary; or
(2) the deposit is expended or obligated for expenditure for the liquidation of existing or subsequently incurred purchase-money indebtedness to a person not a parent company of, or a company affiliated or associated with, the mortgagor on a new vessel.
(b)Additional Requirements for Certain Vessels.—In addition to the requirements of subsection (a)(1), for a vessel not constructed under a construction-differential subsidy contract or not bought from the Secretary of Transportation—
(1) at least 5 percent of the construction (or, if the contract covers more than one vessel, at least 5 percent of the construction of the first vessel) must be completed within 6 months after the date of the construction contract (or within the period of an extension under subsection (c)), as estimated by the Secretary and certified by the Secretary to the Secretary of the Treasury; and
(2) construction under the contract must be completed with reasonable dispatch thereafter.
(c)Extensions.—The Secretary of Transportation may grant extensions of the period within which the deposits must be expended or obligated or within which the construction must have progressed to the extent of 5 percent completion under this section. However, the extensions may not be for a total of more than 2 years for the expenditure or obligation of deposits or one year for the progress of construction.
(Pub. L. 109–304, § 8(c), Oct. 6, 2006, 120 Stat. 1589.)
§ 53311. Taxation of deposits on failure of conditions
A deposited gain, if otherwise taxable income under the law applicable to the taxable year in which the gain was realized, shall be included in gross income for that taxable year, except for purposes of the declared value excess profits tax and the capital stock tax, if—
(1) the deposited gain is not expended or obligated within the appropriate period under section 53310 of this title;
(2) the deposited gain is withdrawn before the end of that period;
(3) the construction related to that deposited gain has not progressed to the extent of 5 percent of completion within the appropriate period under section 53310 of this title; or
(4) the Secretary of Transportation finds and certifies to the Secretary of the Treasury that, for causes within the control of the taxpayer, the entire construction related to that deposited gain is not completed with reasonable dispatch.
(Pub. L. 109–304, § 8(c), Oct. 6, 2006, 120 Stat. 1590.)
§ 53312. Assessment and collection of deficiency tax
Notwithstanding any other provision of law, a deficiency in tax for a taxable year resulting from the inclusion of an amount in gross income as provided by section 53311 of this title, and the amount to be treated as a deficiency under section 53311 instead of as an adjustment for the declared value excess profits tax, may be assessed or a civil action may be brought to collect the deficiency without assessment, at any time. Interest on a deficiency or amount to be treated as a deficiency does not begin until the date the deposited gain or part of the deposited gain in question is required to be included in gross income under section 51111.
(Pub. L. 109–304, § 8(c), Oct. 6, 2006, 120 Stat. 1590.)