[Congressional Record Volume 155, Number 98 (Friday, June 26, 2009)]
[Extensions of Remarks]
[Page E1575]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        REPEAL TONNAGE TAX'S 30-DAY LIMIT ON DOMESTIC OPERATIONS

                                 ______
                                 

                          HON. EARL BLUMENAUER

                               of oregon

                    in the house of representatives

                        Thursday, June 25, 2009

  Mr. BLUMENAUER. Madam Speaker, U.S.-flag ships that compete in 
international trade face many disadvantages. The U.S. tax code should 
not be one of them. Today I am introducing legislation that will help 
smooth the seas for U.S.-flag shippers and increase their international 
competitiveness.
  The version of the American Jobs Creation Act of 2004 that passed 
both the House and Senate provided for the application of a ``tonnage 
tax'' based on the tonnage of a vessel, rather than taxing the U.S. 
vessel's international income at corporate tax rates. In the conference 
process on that legislation, however, new language was inserted which 
states that a U.S. vessel cannot use the tonnage tax on its income from 
international operations if that vessel also operates in U.S. domestic 
commerce for more than 30 days per year.
  This 30-day limitation dramatically limits the availability of the 
tonnage tax for those U.S. ships that operate in both domestic and 
international trade and hinders their competitiveness in foreign 
commerce. It is important to recognize that ships operating in U.S. 
domestic trade already have significant cost disadvantages. The 
inability of domestic operators to use the tonnage tax for their 
international service is a further burden on their competitive position 
in foreign commerce. Foreign registered ships now carry 97 percent of 
the imports and exports moving in United States international trade. 
These foreign vessels are not held to the higher Coast Guard operating 
standards that apply to American-registered ships and foreign vessels 
are virtually untaxed.
  Adding to the perversity of the provision, in December 2006, Congress 
repealed the 30-day limit on domestic trading for approximately 50 
ships operating in the Great Lakes. There are 13 U.S.-flag vessels 
outside of these Great Lakes ships that remain caught in these tax 
provisions. In the interest of providing equity to these 13 vessels, 
this legislation would repeal the 30-day limit on domestic operations, 
enabling these vessels to also utilize the tonnage tax on their 
international income. Under this legislation, these ships will continue 
to pay the normal 35 percent U.S. corporate tax rate on their income 
for operations in domestic commerce.
  Repeal of the tonnage tax's 30-day limit on domestic operations is a 
necessary step toward providing tax equity between U.S.-flag and 
foreign flag vessels. I look forward to working with my colleagues to 
pass this important legislation.

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