[Congressional Record Volume 147, Number 45 (Friday, March 30, 2001)]
[Senate]
[Pages S3217-S3218]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. SNOWE (for herself, Mr. Lott, Mr. Warner, Ms. Collins, Mr. 
        Cochran, Ms. Landrieu, Mr. Breaux, and Mr. Torricelli):
  S. 666. A bill to amend the Internal Revenue Code of 1986 to allow 
the use of completed contract method of accounting in the case of 
certain long-term naval vessel construction contracts; to the Committee 
on Finance.
  Ms. SNOWE. Mr. President, I rise to introduce legislation to simplify 
and restore fairness to the naval shipyard accounting statutes under 
which our six major U.S. naval shipyards pay taxes on the naval ship 
contracts they are awarded by the Navy.
  Quite simply, this legislation would permit naval shipyards to use a 
method of accounting under which shipbuilders would pay income taxes 
upon delivery of a ship rather than during construction. Under current 
law, profits must be estimated during the construction phases of the 
shipbuilding process and taxes must be paid on those estimated profits. 
The legislation being proposed would simply allow naval shipbuilders to 
use a method of accounting, under which the shipbuilder would pay taxes 
when the ship is actually delivered to the Navy.
  Prior to 1982, federal law permitted shipbuilders to use this method, 
but the law was changed due to abuses by federal contractors in another 
sector, having absolutely nothing to do with shipbuilding. Moreover, 
non-government shipbuilding contracts are already allowed to use this 
method of accounting, and this legislation contains provisions designed 
to prevent the types of abuses witnessed in the past. Specifically, the 
bill would restrict shipyards from deferring tax payments for a period 
beyond the time it takes to build a single ship.
  This bill would not reduce the amount of taxes ultimately paid by the 
shipbuilder. It simply would defer payment until the profit is actually 
known upon delivery of the ship. I believe that this is the most fair 
and most sensible accounting method. It is the method

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that naval shipbuilders used to employ. It is the method which 
commercial builders are permitted to use to this day. This legislation 
has the strong support of the major shipyards that build for the Navy. 
As such, I strongly urge my colleagues to join me in a strong show of 
support for this effort.
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