[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 2564 Introduced in Senate (IS)]
106th CONGRESS
2d Session
S. 2564
To provide tax incentives for the construction of seagoing cruise ships
in United States shipyards, and to facilitate the development of a
United States-flag, United States-built cruise industry, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 16, 2000
Ms. Snowe introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To provide tax incentives for the construction of seagoing cruise ships
in United States shipyards, and to facilitate the development of a
United States-flag, United States-built cruise industry, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``All American Cruise Act of 2000''.
TITLE I--TAX INCENTIVES FOR CRUISE SHIP CONSTRUCTION AND OPERATION
SEC. 101. TAX TREATMENT OF UNITED STATES-BUILT CRUISE SHIPS DURING
CONSTRUCTION PERIOD.
(a) Amendment.--Section 460(e) of the Internal Revenue Code of 1986
(relating to special rules for long-term contracts) is amended by
adding at the end the following new paragraph:
``(7) Special rule for cruise ship construction
contracts.--In the case of any contract for the construction or
overhaul of an oceangoing cruise ship of at least 20,000 gross
tons, a contractor may, at the contractor's election, use the
completed contract method of accounting for each ship that is
constructed or overhauled, provided that--
``(A) the construction or overhaul of the ship will
take more than 12 months to complete from the contract
commencement date to the date that the ship is
delivered or returned to the owner,
``(B) the reporting of revenue and costs for each
ship may not be deferred beyond the date of delivery or
return of the ship to the owner, and
``(C) when a contract provides for the construction
or overhaul of more than 1 ship, each ship covered by
the contract will be treated as an individual ship
contract for the purpose of applying the completed
contract method of accounting, and the reporting of
revenue and costs for each ship may not be deferred
beyond the date on which the ship is delivered or
returned to the owner.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2000.
SEC. 102. GROSS INCOME EXCLUSION FOR CRUISE SHIP OPERATIONS.
(a) Amendments.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to amounts specifically
excluded from gross income) is amended by redesignating section 139 as
section 140 and by inserting after section 138 the following new
section:
``SEC. 139. AMOUNTS DERIVED FROM CRUISE SHIP OPERATIONS.
``(a) General Rule.--Gross income of a corporation organized in the
United States shall not include amounts derived by the corporation from
the operation of a cruise ship which was built in the United States and
has a certificate of documentation issued under chapter 121 of title
46, United States Code.
``(b) Definition.--For purposes of subsection (a), the term `cruise
ship' means a seagoing passenger vessel of at least 20,000 gross tons
that provides a full range of overnight accommodations, entertainment,
dining, and other services for its passengers.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 103. CREDIT FOR INCOME FROM CRUISE SHIP CONSTRUCTION CONTRACTS.
(a) Amendment.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to credits against tax)
is amended by adding at the end the following new section:
``SEC. 45D. CRUISE SHIP CONSTRUCTION CREDIT.
``(a) General Rule.--In the case of a taxpayer described in
subsection (b), there shall be allowed a credit against the taxes
imposed by this chapter for the taxable year an amount equal to the
amount of any income taxes that would be paid or accrued during the
taxable year (but for this section) to the United States on the income
realized from any construction contract described in subsection (c).
``(b) Taxpayer Described.--The taxpayer referred to in subsection
(a) is a resident of the United States, or a corporation organized in
the United States, whose average annual gross receipts for the 3
taxable years preceding the taxable year in which such construction
contract is entered into are not less than $30,000,000.
``(c) Construction Contract.--The construction contract referred to
in subsection (a) is any contract for the construction of a cruise ship
entered into by the taxpayer, in a case where the taxpayer estimates
(at the time such contract is entered into) that the ship construction
under the contract will be completed within the 2-year period beginning
on the contract commencement date.
``(d) Definition.--The term `cruise ship' means a seagoing
passenger vessel of at least 20,000 gross tons that provides a full
range of overnight accommodations, entertainment, dining, and other
services for its passengers.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2000.
SEC. 104. ACCELERATED DEPRECIATION.
(a) Amendments.--Section 168(e)(3)(C) of the Internal Revenue Code
of 1986 (relating to accelerated cost recovery) is amended--
(1) by striking ``and'' at the end of clause (i),
(2) by redesignating clause (ii) as clause (iii), and
(3) by inserting after clause (i) the following new clause:
``(ii) a seagoing passenger vessel of at
least 20,000 gross tons that provides a full
range of overnight accommodations,
entertainment, dining, and other services for
its passengers, and''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 105. DEDUCTION FOR CERTAIN BUSINESS EXPENSES ON CRUISE SHIPS.
(a) In General.--Section 274 of the Internal Revenue Code of 1986
(relating to certain entertainment expenses) is amended--
(1) in subsection (h)--
(A) in paragraph (2)--
(i) by striking ``meets the requirements of
paragraph (5) and'', and
(ii) by striking all after ``trade or
business'' and inserting ``and that the cruise
ship is a United States-built vessel registered
in the United States, or a foreign-built vessel
registered in the United States under section
8109 of Public Law 105-56 or title III of the
All American Cruise Act of 2000.'', and
(B) by striking paragraph (5) and by redesignating
paragraphs (6) and (7) as paragraphs (5) and (6),
respectively, and
(2) by striking paragraph (1) of subsection (m) and by
redesignating paragraphs (2) and (3) as paragraphs (1) and (2),
respectively.
(b) Conforming Amendments.--
(1) Section 927(e)(3)(A) of the Internal Revenue Code of
1986 is amended by striking ``section 274(h)(6)(C)'' and
inserting ``section 274(h)(5)(C)''.
(2) Section 936(d)(4)(B) of such Code is amended by
striking ``section 274(h)(6)(A)'' and inserting ``section
274(h)(5)(A)''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
SEC. 106. CREDIT FOR USE OF CLEAN-BURNING GAS ENGINES.
(a) Amendment.--Subpart B of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to foreign tax credit,
etc.) is amended by adding at the end the following new section:
``SEC. 30B. CREDIT FOR USE OF CLEAN-BURNING ENGINES.
``(a) Allowance of Credit.--There shall be allowed as a credit
against the tax imposed by this chapter for the taxable year an amount
equal to 20 percent of the annual cost of fuel consumed by clean-
burning engines on a cruise ship that was built in the United States
and is documented under the laws of the United States.
``(b) Adjustments.--The credit allowed by subsection (a) of this
section for any taxable year shall not exceed the excess (if any) of--
``(1) the regular tax for the taxable year reduced by the
sum of the credits allowable under subpart A and section 27,
over
``(2) the tentative minimum tax for the taxable year.
``(c) Definitions.--For purposes of this section:
``(1) Clean-burning engine.--The term `clean-burning
engine' means a gas turbine engine, manufactured in the United
States or a possession of the United States, that burns 100
percent distillate fuel with less than 1.5 percent sulfur.
``(2) Cruise ship.--The term `cruise ship' means a seagoing
passenger vessel of at least 20,000 gross tons that provides a
full range of overnight accommodations, entertainment, dining,
and other services for its passengers.''.
(b) Clerical Amendment.--The table of sections for subpart B of
part IV of subchapter A of chapter 1 of such Code is amended by adding
at the end the following new item:
``Sec. 30B. Credit for use of clean-
burning engines.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2000.
TITLE II--CAPITAL CONSTRUCTION FUNDS FOR PASSENGER VESSEL CONSTRUCTION
SEC. 201. AMENDMENTS TO MERCHANT MARINE ACT, 1936.
(a) Changes in Vessels to Which Capital Construction Funds Apply.--
(1) The second sentence of subsection (a) of section 607 of
the Merchant Marine Act, 1936 (46 U.S.C. App. 1177) is amended
by striking ``for operation in the United States foreign, Great
Lakes, or noncontiguous domestic trade or in the fisheries of
the United States'' and inserting ``for operation in the
fisheries of the United States, or in the United States
foreign, Great Lakes, or noncontiguous domestic trade, or for
operation as a passenger vessel in the oceangoing domestic
trade,''.
(2) Paragraph (1) of section 607(k) of such Act (defining
eligible vessel) is amended to read as follows:
``(1) The term `eligible vessel' means any vessel--
``(A) constructed in the United States, and if
reconstructed, reconstructed in the United States;
``(B) documented under the laws of the United
States; and
``(C) operated in the foreign or domestic commerce
of the United Sates or in the fisheries of the United
States.
A foreign-built passenger vessel temporarily documented with a
coastwise trade endorsement under section 8109 of Public Law
105-56 or title III of the All American Cruise Act of 2000
shall be treated as satisfying the requirements of subparagraph
(A) of this paragraph.''.
(3) Paragraph (2)(C) of section 607(k) of such Act is
amended to read as follows:
``(C) which the person maintaining the fund agrees
with the Secretary will be operated in the fisheries of
the United States, in the United States foreign, Great
Lakes, or noncontiguous domestic trade, or (only in the
case of a passenger vessel) in the oceangoing domestic
trade.''.
(4) Subsection (f) of section 607 of such Act is amended by
adding at the end thereof the following new paragraph:
``(3) In the case of amounts in any fund as of the date of
the enactment of this paragraph, and any earnings thereon, for
purposes of this subsection, the term `qualified withdrawal'
has the meaning given such term by applying subsection (k)(2)
as of the date of enactment of the All American Cruise Act of
2000.''.
(5) Subsection (k) of section 607 of such Act is amended by
adding at the end thereof the following new paragraphs:
``(10) The terms `foreign commerce' and `foreign trade'
have the meanings given such terms in section 905 of this Act,
except that in the case of passenger vessels, these terms shall
include commerce or trade between foreign ports.
``(11) The term `passenger vessel' means a seagoing
passenger vessel of at least 20,000 gross tons that provides a
full range of overnight accommodations, entertainment, dining,
and other services for its passengers.
``(12) The term `oceangoing domestic trade' means--
``(A) the operation of a passenger vessel on a
coastwise voyage between points in the United States;
or
``(B) the operation of a passenger vessel on a
voyage to transport passengers to the high seas
beginning at a point in the United States and returning
to the same point without stopping at any other
point.''.
(b) Treatment of Certain Lease Payments.--
(1) Paragraph (1) of section 607(f) of such Act is amended
by striking ``or'' at the end of subparagraph (B), by striking
the period at the end of subparagraph (C) and inserting ``,
or'', and by inserting after subparagraph (C) the following new
subparagraph:
``(D) the payment of amounts which reduce the
principal amount (as determined under regulations
promulgated by the Secretary) of a qualified lease of a
qualified vessel or container which is part of the
complement of an eligible vessel.''.
(2) Paragraph (4) of section 607(g) of such Act is amended
by inserting ``or to reduce the principal amount of any
qualified lease'' after ``indebtedness''.
(3) Subsection (k) of section 607 of such Act is further
amended by adding at the end thereof the following new
paragraph:
``(13) the term `qualified lease' means any lease with a
term of at least 5 years.''.
(c) Authority To Make Deposits for Prior Years Based on Audit
Adjustments.--Subsection (b) of section 607 of such Act is amended by
adding at the end the following new paragraph:
``(4) To the extent permitted by joint regulations,
deposits may be made in excess of the limitation described in
paragraph (1) (and any limitation specified in the agreement)
for the taxable year if, by reason of a change in taxable
income for a prior taxable year that has become final pursuant
to a closing agreement or other similar agreement entered into
during the taxable year, the amount of the deposit could have
been made for such prior taxable year.''.
(d) Treatment of Capital Gains and Losses.--
(1) Paragraph (3) of section 607(e) of such Act is amended
to read as follows:
``(3) The capital gain account shall consist of--
``(A) amounts representing long-term capital gains
(as defined in section 1222 of such Code) on assets
referred to in subsection (b)(1)(C), reduced by
``(B) amounts representing long-term capital losses
(as defined in such section) on assets held in the
fund.''.
(2) Subparagraph (B) of section 607(e)(4) of such Act is
amended to read as follows:
``(B)(i) amounts representing short-term capital gains (as
defined in section 1222 of such Code) on assets referred to in
subsection (b)(1)(C), reduced by
``(ii) amounts representing short-term capital losses (as
defined in such section) on assets held in the fund,''.
(3) Subparagraph (B) of section 607(h)(3) of such Act is
amended by striking ``gain'' and all that follows and inserting
``long-term capital gain (as defined in section 1222 of such
Code), and''.
(4) The last sentence of subparagraph (A) of section
607(h)(6) of such Act is amended by striking ``20 percent (34
percent in the case of a corporation)'' and inserting ``the
rate applicable to net capital gain under section 1(h) or
1201(a) of such Code, as the case may be''.
(e) Computation of Interest With Respect to Nonqualified
Withdrawals.--
(1) Subparagraph (C) of section 607(h)(3) of such Act is
amended--
(A) by striking clause (i) and inserting the
following new clause:
``(i) no addition to the tax shall be
payable under section 6651 of such Code,'', and
(B) by striking ``paid at the applicable rate (as
defined in paragraph (4))'' in clause (ii) and
inserting ``paid in accordance with section 6601 of
such Code''.
(2) Subsection (h) of section 607 of such Act is amended by
striking paragraph (4) and by redesignating paragraphs (5) and
(6) as paragraphs (4) and (5), respectively.
(3) Subparagraph (A) of section 607(h)(5) of such Act, as
redesignated by paragraph (2) of this subsection, is amended by
striking ``paragraph (5)'' and inserting ``paragraph (4)''.
(f) Other Changes.--
(1) Section 607 of such Act is amended by striking ``the
Internal Revenue Code of 1954'' each place it appears and
inserting ``the Internal Revenue Code of 1986''.
(2) Subsection (c) of section 607 of such Act is amended by
striking ``interest-bearing securities approved by the
Secretary'' and inserting ``interest-bearing securities and
other income-producing assets (including accounts receivable)
approved by the Secretary''.
SEC. 202. AMENDMENTS OF INTERNAL REVENUE CODE OF 1986.
(a) Treatment of Certain Lease Payments.--
(1) Paragraph (1) of section 7518(e) of the Internal
Revenue Code of 1986 (relating to purposes of qualified
withdrawals) is amended by striking ``or'' at the end of
subparagraph (B), by striking the period at the end of
subparagraph (C) and inserting ``, or'', and by inserting after
subparagraph (C) the following new subparagraph:
``(D) the payments of amounts which reduce the
principal amount (as determined under regulations) of a
qualified lease of a qualified vessel.''.
(2) Paragraph (4) of section 7518(f) of such Code is
amended by inserting ``or to reduce the principal amount of any
qualified lease'' after ``indebtedness''.
(b) Authority To Make Deposits for Prior Years Based on Audit
Adjustments.--Subsection (a) of section 7518 of such Code is amended by
adding at the end the following new paragraph:
``(4) Authority to make deposits for prior years based on
audit adjustments.--To the extent permitted by joint
regulations, deposits may be made in excess of the limitations
described in paragraph (1) (and any limitation specified in the
agreement) for the taxable year if, by reason of a change in
taxable income for a prior taxable year that has become final
pursuant to a closing agreement or other similar agreement
entered into during the taxable year, the amount of the deposit
could have been made for such prior taxable year.''.
(c) Treatment of Capital Gains and Losses.--
(1) Paragraph (3) of section 7518(d) of such Code is
amended to read as follows:
``(3) Capital gain account.--The capital gain account shall
consist of--
``(A) amount representing long-term capital gains
(as defined in section 1222) on assets referred to in
subsection (a)(1)(C), reduced by
``(B) amounts representing long-term capital losses
(as defined in such section) on assets held in the
fund.''.
(2) Subparagraph (B) of section 7518(d)(4) of such Code is
amended to read as follows:
``(B)(i) amounts representing short-term capital
gains (as defined in section 1222) on assets referred
to in subsection (a)(1)(C), reduced by
``(ii) amounts representing short-term capital
losses (as defined in such section) on assets held in
the fund,''.
(3) Subparagraph (B) of section 7518(g)(3) of such Code is
amended by striking ``gain'' and all that follows and inserting
``long-term capital gain (as defined in section 1222), and''.
(4) The last sentence of subparagraph (A) of section
7518(g)(6) of such Code is amended by striking ``20 percent (34
percent in the case of a corporation)'' and inserting ``the
rate applicable to net capital gain under such section 1(h) or
1201(a), as the case may be''.
(d) Computation of Interest With Respect to Nonqualified
Withdrawals.--
(1) Subparagraph (C) of section 7518(g)(3) of such Code is
amended--
(A) by striking clause (i) and inserting the
following new clause:
``(i) no addition to the tax shall be
payable under section 6651,'', and
(B) by striking ``paid as the applicable rate (as
defined in paragraph (4))'' in clause (ii) and
inserting ``paid in accordance with section 6601''.
(2) Subsection (g) of section 7518 of such Code is amended
by striking paragraph (4) and by redesignating paragraphs (5)
and (6) as paragraphs (4) and (5), respectively.
(3) Subparagraph (A) of section 7518(g)(5) of such Code, as
redesignated by paragraph (2) of this subsection, is amended by
striking ``paragraph (5)'' and inserting ``paragraph (4)''.
(e) Other Changes.--
(1) Paragraph (2) of section 7518(b) of such Code is
amended by striking ``interest-bearing securities approved by
the Secretary'' and inserting ``interest-bearing securities and
other income-producing assets (including amounts receivable)
approved by the Secretary''.
(2) Paragraph (1) of section 7518(e) of such Code is
amended by striking the last sentence.
(3) Subsection (i) of section 7518 of such Code is amended
by striking ``enactment of this section'' and inserting
``enactment of the All American Cruise Act of 2000''.
(4) Subparagraph (B) of section 543(a)(1) of such Code is
amended to read as follows:
``(B) interest on amounts set aside in a capital
construction fund under section 607 of the Merchant
Marine Act, 1936 (46 App. U.S.C. 1177), or in a
construction reserve fund under section 511 of such Act
(46 App. U.S.C. 1161).''
(5) Subsection (c) of section 56 is amended by striking
paragraph (2) and by redesignating paragraph (3) as paragraph
(2).
SEC. 203. EFFECTIVE DATE.
(a) In General.--Except as otherwise provided in this section, the
amendments made by this title shall apply to taxable years beginning
after the date of the enactment of this Act.
(b) Changes in Computation of Interest.--The amendments made by
sections 201(e) and 202(d) shall apply to withdrawals made after
December 31, 2000, including for purposes of computing interest on such
a withdrawal for periods on or before such date.
(c) Qualified Leases.--The amendments made by sections 201(b) and
202(a) shall apply to leases in effect on, or entered into after,
December 31, 2000.
TITLE III--DOMESTIC CRUISE INDUSTRY PHASE-IN
SEC. 301. DEFINITIONS.
In this title:
(1) Cruise ship.--The term ``cruise ship'' means a
passenger vessel as defined in section 2101 of title 46, United
States Code, that is at least 20,000 gross tons and provides a
full range of overnight accommodations, entertainment, dining,
and other services for its passengers.
(2) Owner or operator.--The term ``owner or operator''
means, in the case of a vessel, a person owning or operating
the vessel, or chartering the vessel by demise.
(3) Person.--The term ``person'' means a corporation,
partnership, association, or individual.
(4) Related person.--The term ``related person'' means a
person that is--
(A) a holding company, subsidiary, affiliate, or
association of another person; or
(B) an officer, director, or agent of another
person.
(5) Secretary.--The term ``Secretary'' means the Secretary
of Transportation.
SEC. 302. TEMPORARY DOCUMENTATION FOR FOREIGN-BUILT CRUISE SHIP.
(a) In General.--Notwithstanding the provisions of section 8 of the
Act of June 19, 1886 (46 U.S.C. App. 289), and chapter 121 of title 46,
United States Code, the Secretary may issue a certificate of
documentation, with a conditional coastwise trade endorsement, to a
foreign-built cruise ship that is otherwise in compliance with section
27 of the Merchant Marine Act, 1920 (46 U.S.C. App. 883), and section
12106 of title 46, United States Code, only if the Secretary, based on
information provided by the owner or operator of the cruise ship,
determines that--
(1) the owner or operator, or a related person, is
obligated under a binding contract to construct in the United
States 2 or more cruise ships of a size equal to or greater
than the cruise ship being considered for documentation;
(2) the contract provides that the first cruise ship to be
constructed be delivered no later than 4 years after the
contract is entered into, and that the second cruise ship be
delivered no later than 5 years after the contract is entered
into;
(3) each cruise ship to be constructed under the contract
is different from any cruise ship to be constructed under a
contract that serves as the basis for the issuance under this
section of a certificate of documentation for another foreign-
built cruise ship; and
(4) in the case of a contract for more than 2 ships in a
series, the average period between the delivery dates of the
ships under the contract does not exceed 24 months.
(b) Expiration.--A certificate of documentation issued under
subsection (a) shall expire and cease to be valid on the date that is
12 months after the projected delivery date for the last cruise ship to
be built under the construction contract furnished by the owner or
operator upon applying for documentation. The Secretary shall specify
the expiration date on the face of the certificate of documentation.
(c) Transfer of Registry.--Notwithstanding section 9(c) of the
Shipping Act, 1916 (46 U.S.C. App. 808(c)), a person may--
(1) sell, lease, charter, deliver, or in any manner
transfer, or agree to sell, lease, charter, deliver, or in any
manner transfer, to a person that is not a citizen of the
United States, any interest in or control of a foreign-built
cruise ship documented under subsection (a) of this section; or
(2) place that cruise ship under foreign registry or
operate that ship under the authority of a foreign country.
SEC. 303. PERMIT REQUIRED FOR FOREIGN-BUILT CRUISE SHIPS.
(a) In General.--A foreign-built cruise ship documented under
section 302 shall not operate in coastwise trade unless the owner or
operator holds a permit issued by the Secretary that authorizes the
ship to transport passengers on itineraries between ports of the United
States or between a port of the United States and a foreign port.
(b) Exclusions.--A permit issued under this section shall prohibit
the cruise ship from--
(1) operating as a ferry;
(2) regularly carrying for hire vehicles or other cargo; or
(3) operating between or among islands or other points in
the State of Hawaii.
(c) Expiration.--The permit shall expire on the expiration date
specified on the certificate of documentation issued for the cruise
ship involved, and the expiration date shall be printed on the face of
the permit.
(d) Penalty.--A person who fails to comply with the terms and
conditions of a permit issued under this section, or operates a
foreign-built cruise ship in the coastwise trade without such a permit,
is liable to the United States Government for a civil penalty of not
more than $10,000. Each day of a continuing violation is a separate
violation.
SEC. 304. REVOCATION OF COASTWISE TRADE ENDORSEMENT AND PERMIT.
The Secretary shall revoke both the coastwise trade endorsement
issued under section 302, and the permit issued under section 303, if
the Secretary determines that the owner or operator of the cruise ship
involved is not in substantial compliance with the terms and conditions
of--
(1) the ship construction contract that was the basis for
issuance of documentation under section 302; or
(2) the permit issued under section 303.
SEC. 305. APPLICATION TO OTHER PROVISIONS OF LAW.
Nothing in this title affects or otherwise modifies the authority
contained in and granted to a person by section 8109 of the Department
of Defense Appropriations Act, 1998 (Public Law 105-56; 111 Stat.
1244).
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