[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 222 Introduced in Senate (IS)]
107th CONGRESS
1st Session
S. 222
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
January 31, 2001
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 2001''.
TITLE I--TAX INCENTIVES FOR CRUISE SHIP CONSTRUCTION AND OPERATION
SEC. 101. TAX TREATMENT OF UNITED STATES-BUILT CRUISE SHIPS DURING
CONSTRUCTION PERIOD.
(a) In General.--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, 2001.
SEC. 102. GROSS INCOME EXCLUSION FOR CRUISE SHIP OPERATIONS.
(a) In General.--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, 2001.
SEC. 103. CREDIT FOR INCOME FROM CRUISE SHIP CONSTRUCTION CONTRACTS.
(a) In General.--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. CRUISE SHIP CONSTRUCTION CREDIT.
``(a) Allowance of Credit.--In the case of an eligible taxpayer,
there shall be allowed a credit against the tax imposed by this chapter
for the taxable year an amount equal the portion of such tax which is
attributable to taxable income from any construction contract described
in subsection (c).
``(b) Eligible Taxpayer.--For purposes of subsection (a), an
eligible taxpayer 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.--A construction contract described in
this subsection is a contract--
``(1) for the construction of a cruise ship,
``(2) entered into by the taxpayer, and
``(3) for which the taxpayer estimates (at the time such
contract is entered into) that the ship construction under the
contract will be completed within a 2-year period beginning on
the contract commencement date.
``(d) Cruise Ship.--For purposes of this section, 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.
``(e) Limitation Based on Amount of Tax.--The aggregate amount of
the credit allowed under subsection (a) shall not exceed--
``(1) the sum of the taxpayer's regular tax liability and
the tax imposed by section 55 for the taxable year, reduced by
``(2) the sum of the credits allowable under subparts A, B
(other than this section), and D.''.
(b) Conforming Amendment.--The table of sections for subpart B of
part IV of subchapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by inserting after the item relating to section 30A the
following new item:
``Sec. 30B. Cruise ship construction
credit.''.
(c) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2001.
SEC. 104. ACCELERATED DEPRECIATION.
(a) In General.--Section 168(e)(3)(C) of the Internal Revenue Code
of 1986 (relating to classification of certain property) is amended by
redesignating clause (ii) as clause (iii) and inserting after clause
(i) the following new clause:
``(ii) a cruise ship (as defined in section
30B), and''.
(b) Effective Date.--The amendment made by this section shall apply
to property placed in service after December 31, 2001.
SEC. 105. DEDUCTION FOR CERTAIN BUSINESS EXPENSES ON CRUISE SHIPS.
(a) Deduction Allowed.--
(1) Conventions on cruise ships.--Section 274(h) of the
Internal Revenue Code of 1986 (relating to conventions on
cruise ships) is amended--
(A) in paragraph (2), by striking ``meets the
requirements of paragraph (5)'' and all that follows
and inserting ``establishes that the meeting is
directly related to the active conduct of the
individual's trade or business and that the cruise ship
is--
``(A) a United States-built vessel registered in
the United States, or
``(B) 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 2001.'',
and
(B) by striking paragraph (5) and by redesignating
paragraphs (6) and (7) as paragraphs (5) and (6),
respectively.
(2) Luxury water travel.--Section 274(m) of such Code
(relating to additional limitations on travel expenses) is
amended by striking paragraph (1) and 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, 2001.
SEC. 106. CREDIT FOR USE OF CLEAN-BURNING GAS ENGINES.
(a) In General.--Subpart B of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to foreign tax credit,
etc.), as amended by section 103, is amended by adding at the end the
following new section:
``SEC. 30C. 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 amount paid or incurred by the taxpayer for
the taxable year with respect to fuel consumed by clean-burning engines
of an eligible cruise ship.
``(b) 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' has the meaning
given the same term in section 30B.
``(3) Eligible cruise ship.--The term `eligible cruise
ship' means a cruise ship which is--
``(A) built in the United States, and
``(B) documented under the laws of the United
States.
``(c) Application With Other Credits.--The credit allowed under
subsection (a) 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 sections 27,
29, 30, and 30A, over
``(2) the tentative minimum tax for the taxable year.''.
(b) Clerical Amendment.--The table of sections for subpart B of
part IV of subchapter A of chapter 1 of the Internal Revenue Code of
1986, as amended by section 103, is amended by adding at the end the
following new item:
``Sec. 30C. 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, 2001.
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) Inclusion of passenger vessels.--The second sentence of
subsection (a) of section 607 of the Merchant Marine Act, 1936
(46 U.S.C. App. 1178) 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) Definition of eligible vessel.--Paragraph (1) of
section 607(k) of such Act 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 2001
shall be treated as satisfying the requirements of subparagraph
(A) of this paragraph.''.
(3) Definition of qualified vessel.--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) Additional definitions.--Subsection (k) of section 607
of such Act is amended by adding at the end 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 a passenger vessel, 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) Qualified withdrawal.--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) Tax treatment.--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) Definition of qualified lease.--Subsection (k) of
section 607 of such Act, as amended by subsection (a)(4), is
amended by adding at the end 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) Capital gain account.--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) Ordinary income account.--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) Tax treatment.--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) Rate of tax.--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) Interest.--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) in clause (ii), by striking ``paid at the
applicable rate (as defined in paragraph (4))'' and
inserting ``paid in accordance with section 6601 of
such Code''.
(2) Conforming amendments.--
(A) 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.
(B) Subparagraph (A) of section 607(h)(5) of such
Act, as redesignated by subparagraph (A), is amended by
striking ``paragraph (5)'' and inserting ``paragraph
(4)''.
(f) Other Changes.--
(1) Technical amendment.--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) Income-producing assets.--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) Qualified withdrawal.--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 payment of amounts which reduce the
principal amount (as determined under regulations) of a
qualified lease of a qualified vessel.''.
(2) Tax treatment.--Paragraph (4) of section 7518(f) of
such Code (relating to adjustment to basis of vessels, etc.,
where withdrawals pay principal on debt) 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 the Internal Revenue
Code of 1986 (relating to ceiling on deposits) 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) Capital gain account.--Paragraph (3) of section 7518(d)
of the Internal Revenue Code of 1986 (relating to establishment
of accounts) 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) Ordinary income account.--Subparagraph (B) of section
7518(d)(4) of such Code (relating to ordinary income account)
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) Tax treatment.--Subparagraph (B) of section 7518(g)(3)
of such Code (relating to operating rules) is amended by
striking ``gain'' and all that follows and inserting ``long-
term capital gain (as defined in section 1222), and''.
(4) Rate of tax.--The last sentence of subparagraph (A) of
section 7518(g)(6) of such Code (relating to nonqualified
withdrawals taxed at highest marginal rate) 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) Interest.--Subparagraph (C) of section 7518(g)(3) of
the Internal Revenue Code of 1986 (relating to operating rules)
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) in clause (ii), by striking ``paid as the
applicable rate (as defined in paragraph (4))'' and
inserting ``paid in accordance with section 6601''.
(2) Conforming amendments.--
(A) 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.
(B) Subparagraph (A) of section 7518(g)(5) of such
Code, as redesignated by subparagraph (A), is amended
by striking ``paragraph (5)'' and inserting ``paragraph
(4)''.
(e) Other Changes.--
(1) Income-producing assets.--Paragraph (2) of section
7518(b) of the Internal Revenue Code of 1986 (relating to
requirements as to investments) 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 (relating
to definitions) is amended by striking ``enactment of this
section'' and inserting ``enactment of the All American Cruise
Act of 2001''.
(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. 1178), or in a
construction reserve fund under section 511 of such Act
(46 App. U.S.C. 1161).''
(5) Subsection (c) of section 56 of such Code 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, 2001, 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, 2001.
<all>