[Congressional Record Volume 159, Number 36 (Wednesday, March 13, 2013)]
[Senate]
[Pages S1787-S1789]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. WYDEN (for himself, Ms. Murkowski, Mr. Begich, Ms.

[[Page S1788]]

        Cantwell, Mrs. Murray, and Mr. Merkley):
  S. 551. A bill to provide an election to terminate certain capital 
construction funds without penalties; to the Committee on Finance.
  Mr. WYDEN. Mr. President, today I am reintroducing a bill to reform 
the Capital Construction Fund. This legislation would allow fishers to 
withdraw monies from their CCF accounts without penalty or interest, 
preventing overfishing and overcapitalization.
  The Capital Construction Fund, CCF, program was developed at a time 
when American fishers were having a hard time competing with highly 
efficient foreign fishing vessels. The program was designed to enable 
fishers to deposit a portion of their fishing-related earnings into a 
CCF account on a tax-deferred basis. Fishers then make withdrawals from 
their CCF account to construct, reconstruct, or under limited 
circumstances, acquire fishing vessels. However, any unauthorized 
withdrawal from CCF account is subject to severe interest and other 
penalties.
  The program was a success. The CCF program helped U.S. fishers build 
a modern state-of-the-art fleet. Unfortunately, that U.S. fleet is now 
overcapitalized. This problem is exacerbated by concerns surrounding 
overfishing. Fisheries managers have begun to implement catch-share 
limits to reduce the number of fish that they allow fishers to catch 
each year. Now, the U.S. commercial fishing fleet has more harvesting 
capacity than our fisheries can sustainably support. However, the 
monies fishers put into CCF accounts remain and represent a potential 
for further overcapitalization. Yet, current CCF regulations penalize 
withdrawals made for anything other than authorized expenditures.
  The resulting situation is problematic for the fishers, the industry 
and the resource. That is why I am reintroducing legislation today, 
along with my colleague Senator Murkowski, to address this problem and 
relieve the pressure to increase further capitalization of the fishing 
fleet. My legislation will enable CCF accountholders to make a one-time 
withdrawal from their CCF accounts. Accountholders would be required to 
pay the taxes due on the monies withdrawn, but without having to pay 
tax penalties. An income-averaging formula would be applied to the 
withdrawals in an effort to avoid assessing an excessive tax rate on 
the one-time withdrawal. Any fisher taking advantage of one-time 
withdrawal would then be required to close their CCF accounts and would 
be prohibited from further participation in the program.
  This is a win-win-win situation. The fisher gets to take the money 
out of his CCF without having to pay penalties and interest, but still 
pays the taxes when due; the government gets taxes on the withdrawals; 
and the resource and the fishers who remain in the fishery avoid 
further capitalization of an already over-capitalized industry.
  I look forward to working with Senators Murkowski, Murray, Cantwell, 
Begich and Merkley, the fishing community, and the bill's other 
supporters to advance this legislation to the President's desk.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 551

       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 ``Capital Construction Fund 
     Penalty Relief Act''.

     SEC. 2. ELECTION TO TERMINATE CERTAIN CAPITAL CONSTRUCTION 
                   FUNDS.

       (a) Amendments to Chapter 535 of Title 46, United States 
     Code.--
       (1) In general.--Chapter 535 of title 46, United States 
     Code, is amended by adding at the end the following new 
     section:

     ``Sec. 53518. Election to terminate

       ``(a) In General.--
       ``(1) Election.--Any person who has entered into an 
     agreement under this chapter with respect to a vessel 
     operated in the fisheries of the United States may make an 
     election under this paragraph to terminate the capital 
     construction fund established under such agreement.
       ``(2) Effect of election on individuals.--In the case of an 
     individual who makes an election under paragraph (1) with 
     respect to a capital construction fund--
       ``(A) any amount remaining in such capital construction 
     fund on the date of such election shall be distributed to 
     such individual as a nonqualified withdrawal, except that--
       ``(i) in computing the tax on such withdrawal, except as 
     provided in paragraph (4), subsections (c)(3)(B) and (f) of 
     section 53511 shall not apply; and
       ``(ii) the taxpayer may elect to average the income from 
     such withdrawal as provided in subsection (b); and
       ``(B) such individual shall not be eligible to enter into, 
     directly or indirectly, any future agreement to establish a 
     capital construction fund under this chapter with respect to 
     a vessel operated in the fisheries of the United States.
       ``(3) Effect of election for entities.--
       ``(A) In general.--In the case of a person (other than an 
     individual) who makes an election under paragraph (1)--
       ``(i) the total amount in the capital construction fund on 
     the date of such election shall be distributed to the 
     shareholders, partners, or members of such person in 
     accordance with the terms of the instruments setting forth 
     the ownership interests of such shareholders, partners, or 
     members;
       ``(ii) each shareholder, partner, or member shall be 
     treated as having established a special temporary capital 
     construction fund and having deposited amounts received in 
     the distribution into such special temporary capital 
     construction fund;
       ``(iii) no gain or loss shall be recognized with respect to 
     such distribution;
       ``(iv) the basis of any shareholder, partner, or member in 
     the person shall not be reduced as a result of such 
     distribution;
       ``(v) any amounts not distributed pursuant to clause (i) 
     shall be distributed in a nonqualified withdrawal; and
       ``(vi) such person shall not be eligible to enter into, 
     directly or indirectly, any future agreement to establish a 
     capital construction fund under this chapter with respect to 
     a vessel operated in the fisheries of the United States.
       ``(B) Special temporary capital construction funds.--For 
     purposes of this chapter, a special temporary capital 
     construction fund shall be treated in the same manner as a 
     capital construction fund established under section 53503, 
     except that the following rules shall apply:
       ``(i) A special temporary capital construction fund shall 
     be established without regard to any agreement under section 
     53503 and without regard to any eligible or qualified vessel.
       ``(ii) Section 53505 shall not apply and no amounts may be 
     deposited into a special temporary capital construction fund 
     other than amounts received pursuant to a distribution 
     described in subparagraph (A)(i).
       ``(iii) In the case of any amounts distributed from a 
     special temporary capital construction fund directly to a 
     capital construction fund of the taxpayer established under 
     section 53505--

       ``(I) no gain or loss shall be recognized;
       ``(II) the limitation under section 53505 shall not apply 
     with respect to any amount so transferred;
       ``(III) such amounts shall not reduce taxable income under 
     section 53507(a)(1); and
       ``(IV) for purposes of section 53511(e), such amounts shall 
     be treated as deposited in the capital construction fund on 
     the date that such funds were deposited in the capital 
     construction fund with respect to which the election under 
     paragraph (1) was made.

       ``(iv) In the case of any amounts distributed from a 
     special temporary capital construction fund pursuant to an 
     election under paragraph (1), clauses (i) and (ii) of 
     paragraph (2)(A) shall not apply to so much of such amounts 
     as are attributable to earnings accrued after the date of the 
     establishment of such special temporary capital construction 
     fund.
       ``(v) Any amount not distributed from a special temporary 
     capital construction fund before the due date of the tax 
     return (including extension) for the last taxable year of the 
     individual ending before January 1, 2019, shall be treated as 
     distributed to the taxpayer on the day before such due date 
     as if an election under paragraph (1) were made by the 
     taxpayer on such day.
       ``(C) Regulations.--The joint regulations shall provide 
     rules for--
       ``(i) assigning the amounts received by the shareholders, 
     partners, or members in a distribution described in 
     subparagraph (A)(i) to the accounts described in section 
     53508(a) in special temporary capital construction funds; and
       ``(ii) preventing the abuse of the purposes of this 
     section.
       ``(4) Tax benefit rule.--Rules similar to the rules under 
     section 53511(f)(3) shall apply for purposes of determining 
     tax liability on any nonqualified withdrawal under paragraph 
     (2)(A), (3)(A)(v), or (3)(B)(v).
       ``(5) Election.--Any election under paragraph (1)--
       ``(A) may only be made--
       ``(i) by a person who maintains a capital construction fund 
     with respect to a vessel operated in the fisheries of the 
     United States on the date of the enactment of this section; 
     or
       ``(ii) by a person who maintains a capital construction 
     fund which was established pursuant to paragraph (3)(A)(ii) 
     as a result of an election made by an entity in which such 
     person was a shareholder, partner, or member;
       ``(B) shall be made not later than the due date of the tax 
     return (including extensions) for the person's last taxable 
     year ending on or before December 31, 2018; and

[[Page S1789]]

       ``(C) shall apply to all amounts in the capital 
     construction fund with respect to which the election is made.
       ``(b) Election to Average Income.--At the election of an 
     individual who has received a distribution described in 
     subsection (a), for purposes of section 1301 of the Internal 
     Revenue Code of 1986--
       ``(1) such individual shall be treated as engaged in a 
     fishing business, and
       ``(2) such distribution shall be treated as income 
     attributable to a fishing business for such taxable year.''.
       (2) Conforming amendments.--
       (A) Section 53511 of title 46, United States Code, is 
     amended by striking ``section 53513'' and inserting 
     ``sections 53513 and 53518''.
       (B) The table of sections for chapter 535 of title 46, 
     United States Code, is amended by inserting after the item 
     relating to section 53517 the following new item:

``53518. Election to terminate.''.

       (b) Amendments to the Internal Revenue Code of 1986.--
       (1) In general.--Section 7518 of the Internal Revenue Code 
     of 1986 is amended by adding at the end the following new 
     subsection:
       ``(j) Election To Terminate Capital Construction Funds.--
       ``(1) In general.--Any person who has entered into an 
     agreement under chapter 535 of title 46 of the United States 
     Code, with respect to a vessel operated in the fisheries of 
     the United States may make an election under this paragraph 
     to terminate the capital construction fund established under 
     such agreement.
       ``(2) Effect of election on individuals.--In the case of an 
     individual who makes an election under paragraph (1) with 
     respect to a capital construction fund, any amount remaining 
     in such capital construction fund on the date of such 
     election shall be distributed to such individual as a 
     nonqualified withdrawal, except that--
       ``(A) in computing the tax on such withdrawal, except as 
     provided in paragraph (4), paragraphs (3)(C)(ii) and (6) of 
     subsection (g) shall not apply, and
       ``(B) the taxpayer may elect to average the income from 
     such withdrawal as provided in paragraph (6).
       ``(3) Effect of election for entities.--
       ``(A) In general.--In the case of a person (other than an 
     individual) who makes an election under paragraph (1)--
       ``(i) the total amount in the capital construction fund on 
     the date of such election shall be distributed to the 
     shareholders, partners, or members of such person in 
     accordance with the terms of the instruments setting forth 
     the ownership interests of such shareholders, partners, or 
     members,
       ``(ii) each shareholder, partner, or member shall be 
     treated as having established a special temporary capital 
     construction fund and having deposited amounts received in 
     the distribution into such special temporary capital 
     construction fund,
       ``(iii) no gain or loss shall be recognized with respect to 
     such distribution,
       ``(iv) the basis of any shareholder, partner, or member in 
     the person shall not be reduced as a result of such 
     distribution, and
       ``(v) any amounts not distributed pursuant to clause (i) 
     shall be distributed as a nonqualified withdrawal.
       ``(B) Special temporary capital construction funds.--For 
     purposes of this section, a special temporary capital 
     construction fund shall be treated in the same manner as a 
     capital construction fund established under section 53503 of 
     title 46, United States Code, except that the following rules 
     shall apply:
       ``(i) Subsection (a) shall not apply and no amounts may be 
     deposited into a special temporary capital construction fund 
     other than amounts received pursuant to a distribution 
     described in subparagraph (A)(i).
       ``(ii) In the case of any amounts distributed from a 
     special temporary capital construction fund directly to a 
     capital construction fund of the taxpayer established under 
     section 53505 of title 46, United States Code--

       ``(I) no gain or loss shall be recognized;
       ``(II) the limitation under subsection (a) shall not apply 
     with respect to any amount so transferred;
       ``(III) such amounts shall not reduce taxable income under 
     subsection (c)(1)(A); and
       ``(IV) for purposes of subsection (g)(5), such amounts 
     shall be treated as deposited in the capital construction 
     fund on the date that such funds were deposited in the 
     capital construction fund with respect to which the election 
     under paragraph (1) was made.

       ``(iii) In the case of any amounts distributed from a 
     special temporary capital construction fund pursuant to an 
     election under paragraph (1), subparagraphs (A) and (B) of 
     paragraph (2) shall not apply to so much of such amounts as 
     are attributable to earnings accrued after the date of the 
     establishment of such special temporary capital construction 
     fund.
       ``(iv) Any amount not distributed from a special temporary 
     capital construction fund before the due date of the tax 
     return (including extension) for the last taxable year of the 
     individual ending before January 1, 2019, shall be treated as 
     distributed to the taxpayer on the day before such due date 
     as if an election under paragraph (1) were made by the 
     taxpayer on such day.
       ``(C) Regulations.--The joint regulations shall provide 
     rules for--
       ``(i) assigning the amounts received by the shareholders, 
     partners, or members in a distribution described in 
     subparagraph (A)(i) to the accounts described in subsection 
     (d)(1) in special temporary capital construction funds; and
       ``(ii) preventing the abuse of the purposes of this 
     section.
       ``(4) Tax benefit rule.--Rules similar to the rules under 
     subsection (g)(6)(B) shall apply for purposes of determining 
     tax liability on any nonqualified withdrawal under paragraph 
     (2), (3)(A)(v), or (3)(B)(iv).
       ``(5) Election.--Any election under paragraph (1)--
       ``(A) may only be made--
       ``(i) by a person who maintains a capital construction fund 
     with respect to a vessel operated in the fisheries of the 
     United States on the date of the enactment of this 
     subsection, or
       ``(ii) by a person who maintains a capital construction 
     fund which was established pursuant to subparagraph 
     (3)(A)(ii) as a result of an election made by an entity in 
     which such person was a shareholder, partner, or member,
       ``(B) shall be made not later than the due date of the tax 
     return (including extensions) for the person's last taxable 
     year ending on or before December 31, 2018, and
       ``(C) shall apply to all amounts in the capital 
     construction fund with respect to which the election is made.
       ``(6) Election to average income.--At the election of an 
     individual who has received a distribution described in 
     paragraph (2), for purposes of section 1301--
       ``(A) such individual shall be treated as engaged in a 
     fishing business, and
       ``(B) such distribution shall be treated as income 
     attributable to a fishing business for such taxable year.''.
       (2) Conforming amendment.--Section 7518(g)(1) of such Code 
     is amended by striking ``subsection (h)'' and inserting 
     ``subsections (h) and (j)''.
                                 ______