II 111th CONGRESS 1st Session S. 58 IN THE SENATE OF THE UNITED STATES January 6, 2009 Mr. Inouye introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to modify the application of the tonnage tax on vessels operating in the dual United States domestic and foreign trades, and for other purposes.

1.

Modification of the application of the tonnage tax on vessels operating in the dual United States domestic and foreign trades

(a)

In general

Subsection (f) of section 1355 of the Internal Revenue Code of 1986 (relating to definitions and special rules) is amended to read as follows: (f)

Effect of operating a qualifying vessel in the dual United States domestic and foreign trades

For purposes of this subchapter— (1)an electing corporation shall be treated as continuing to use a qualifying vessel in the United States foreign trade during any period of use in the United States domestic trade, and (2)gross income from such United States domestic trade shall not be excluded under section 1357(a), but shall not be taken into account for purposes of section 1353(b)(1)(B) or for purposes of section 1356 in connection with the application of section 1357 or 1358. . (b)

Regulatory authority for allocation of credits, income, and deductions

Section 1358 of the Internal Revenue Code of 1986 (relating to allocation of credits, income, and deductions) is amended— (1)by striking in accordance with this subsection in subsection (c) and inserting to the extent provided in such regulations as may be prescribed by the Secretary, and (2)by adding at the end the following new subsection: (d)

Regulations

The Secretary shall prescribe regulations consistent with the provisions of this subchapter for the purpose of allocating gross income, deductions, and credits between or among qualifying shipping activities and other activities of a taxpayer. . (c)

Conforming amendments

(1)Section 1355(a)(4) of the Internal Revenue Code of 1986 is amended by striking exclusively. (2)Section 1355(b)(1)(B) of such Code is amended by striking as a qualifying vessel and inserting in the transportation of goods or passengers. (d)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.