[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pay the taxes due on the monies withdrawn, but without having to pay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)''.
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