[Congressional Record Volume 159, Number 113 (Thursday, August 1, 2013)]
[Senate]
[Pages S6222-S6223]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ROCKEFELLER:
  S. 1449. A bill to amend the Internal Revenue Code of 1986 to provide 
that income attributable to certain passenger cruise voyages beginning 
or ending in the United States shall be treated as effectively 
connected with the conduct of a trade or business within the United 
States; to the Committee on Finance.
  Mr. ROCKEFELLER. Mr. President, today I am introducing comprehensive 
legislation to repeal corporate tax loopholes that allow the cruise 
industry to avoid paying its fair share of U.S. corporate income taxes.
  These bills change the treatment of the revenue that foreign-based 
cruise lines earn from ships that embark or disembark nearly 15 million 
passengers a year in the United States. A string of recent incidents 
has demonstrated that when cruise ships get into trouble, the companies 
rely on the resources and assistance of the U.S. Navy and Coast Guard. 
The industry also uses the services of over 20 other U.S. agencies to 
the tune of millions of taxpayer dollars every year.
  The majority of cruise companies are organized as foreign 
corporations, even though many of their headquarters and executives are 
located in the United States. By incorporating in foreign countries, 
the cruise industry enjoys a special exemption under section 883 of the 
Internal Revenue Code, which provides that certain foreign corporations 
are not subject to U.S. taxes on income derived from the international 
operation of ships, even if the source of the income is in the United 
States.
  Today, I am introducing two bills, S. 1449 and S. 1450. The first 
would eliminate the section 883 special exemption for cruise industry 
income derived from passenger cruise voyages that embark or disembark 
passengers in the United States. This income would be treated as being 
U.S. sourced and effectively connected with a U.S. trade or business, 
so it would be subject to U.S. taxes at the same rate as other income.
  The second bill would impose a 5 percent excise tax on gross income 
from cruises where passengers embark or disembark in the United States. 
Funds generated from the excise tax will help fund a national program 
to make infrastructure improvements vital to the efficient 
transportation of goods and services.
  For too long, the cruise industry has been able to use taxpayer 
provided services without actually paying for them. It is time the 
cruise industry begins to pay for the services it uses.
  Mr. President, I ask unanimous consent that the text of the bills be 
printed in the Record.
  There being no objection, the text of the bills were ordered to be 
printed in the Record, as follows:

                                S. 1449

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. TAXATION OF UNITED STATES CRUISE INDUSTRY INCOME 
                   OF NONRESIDENT ALIENS AND FOREIGN CORPORATIONS.

       (a) United States Cruise Industry Income Treated as 
     Effectively Connected to the Conduct of a Trade or Business 
     Within the United States.--
       (1) Income from sources without the united states.--
       (A) In general.--Paragraph (4) of section 864(c) of the 
     Internal Revenue Code of 1986 is amended by redesignating 
     subparagraph (D) as subparagraph (C) and by inserting after 
     subparagraph (C) the following new subparagraph:
       ``(C) United states cruise industry income.--
       ``(i) In general.--United States cruise industry income 
     shall be treated as effectively connected with the conduct of 
     a trade or business within the United States.
       ``(ii) United states cruise industry income.--For purposes 
     of this subparagraph, the term `United States cruise industry 
     income' means income attributable to any covered passenger 
     cruise (as defined in paragraph (8)), including income 
     directly or indirectly attributable to the carriage of 
     passengers and any on-board or off-board activities 
     incidental to such covered passenger cruise.''.
       (B) Covered passenger cruise.--Subsection (c) of section 
     864 of such Code is amended by adding at the end the 
     following new paragraph:
       ``(8) Covered passenger cruise.--For purposes of paragraph 
     (4)(C)--
       ``(A) Definition.--
       ``(i) In general.--The term `covered passenger cruise' 
     means a voyage of a commercial passenger cruise vessel--

       ``(I) that extends over 1 or more nights,
       ``(II) during which passengers embark or disembark the 
     vessel in the United States.

       ``(ii) Exceptions for certain voyages.--Such term shall not 
     include any voyage--

       ``(I) on any vessel owned or operated by the United States, 
     a State, or any subdivision thereof,
       ``(II) which occurs exclusively on the inland waterways of 
     the United States, or
       ``(III) in which a vessel in the usual course of employment 
     proceeds, without an intervening foreign port of call from 
     one port or place in the United States to the same port or 
     place or to another port or place in the United States.

       ``(B) Passenger cruise vessel.--For purposes of 
     subparagraph (A)--
       ``(i) In general.--The term `passenger cruise vessel' means 
     any passenger vessel having berth or stateroom accommodations 
     for at least 250 passengers.
       ``(ii) Exceptions.--Such term shall not include any ferry, 
     recreational vessel, sailing school vessel, small passenger 
     vessel, offshore supply vessel, or any other vessel 
     determined under regulations by the Secretary to be excluded 
     from the application of this part.
       ``(iii) Definitions.--Any term used in this section which 
     used in chapter 21 of title 46, United States Code, shall 
     have the meaning given such term under section 2101 of such 
     title.''.
       (C) Conforming amendment.--Subparagraph (A) of section 
     864(c)(4) of such Code is amended by striking ``subparagraphs 
     (B) and (C)'' and inserting ``subparagraphs (B), (C), and 
     (D)''.
       (2) Income from sources within the united states.--
     Paragraph (4) of section 887(b) of such Code is amended by 
     adding at the end the following flush sentence:

     ``The preceding sentence shall not apply to with respect to 
     any United State source gross transportation income which is 
     United States cruise industry income (as defined in section 
     864(c)((4)(C)(ii)).''.
       (b) Repeal of Exemption From Gross Income for Certain 
     Taxpayers.--
       (1) Nonresident aliens.--Paragraph (1) of section 872(b) of 
     the Internal Revenue Code of 1986 is amended by inserting 
     ``(other than United States cruise industry income (as 
     defined in section 864(c)(4)(C)))'' after ``or ships''.
       (2) Foreign corporations.--Paragraph (1) of section 883(a) 
     of such Code is amended by inserting ``(other than United 
     States cruise industry income (as defined in section 
     864(c)(4)(C)))'' after ``or ships''.

[[Page S6223]]

       (c) Income Tax Treaties.--Section 894 of the Internal 
     Revenue Code of 1986 is amended by adding at the end the 
     following new subsection:
       ``(d) Special Rule for United States Cruise Industry 
     Income.--Notwithstanding subsection (a), no tax exemption or 
     reduced tax rate shall be permitted under any treaty of the 
     United States with respect to United States cruise industry 
     income (as defined in section 864(c)(4)(C)).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to income attributable to voyages made after the 
     date of the enactment of this Act.

                                S. 1450

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. EXCISE TAX ON GROSS RECEIPTS DERIVED FROM CRUISES.

       (a) In General.--Subchapter B of chapter 36 of the Internal 
     Revenue Code of 1986 is amended by inserting after section 
     4472 the following:

                       ``PART II--AD VALOREM TAX

``Sec. 4476. Imposition of tax.
``Sec. 4477. Definitions.

     ``SEC. 4476. IMPOSITION OF TAX.

       ``(a) In General.--In addition to any other tax, there is 
     hereby imposed a tax of 5 percent of the allocable amount 
     with respect to any covered passenger cruise.
       ``(b) By Whom Paid.--The tax imposed by this section shall 
     be paid by the person providing the covered passenger cruise.

     ``SEC. 4477. DEFINITIONS.

       ``For purposes of this section--
       ``(1) Covered passenger cruise.--
       ``(A) In general.--The term `covered passenger cruise' 
     means a voyage of a commercial passenger cruise vessel--
       ``(i) that extends over 1 or more nights,
       ``(ii) during which passengers embark or disembark the 
     vessel in the United States.
       ``(B) Exceptions for certain voyages.--Such term shall not 
     include any voyage--
       ``(i) on any vessel owned or operated by the United States, 
     a State, or any subdivision thereof,
       ``(ii) which occurs exclusively on the inland waterways of 
     the United States, or
       ``(iii) in which a vessel in the usual course of employment 
     proceeds, without an intervening foreign port of call from 
     one port or place in the United States to the same port or 
     place or to another port or place in the United States.
       ``(2) Passenger cruise vessel.--
       ``(A) In general.--The term `passenger cruise vessel' means 
     any passenger vessel--
       ``(i) having berth or stateroom accommodations for at least 
     250 passengers, and
       ``(ii) that is used in the business of carrying passengers 
     for hire.
       ``(B) Exceptions.--Such term shall not include any ferry, 
     recreational vessel, sailing school vessel, small passenger 
     vessel, offshore supply vessel, or any other vessel 
     determined under regulations by the Secretary to be excluded 
     from the application of this part.
       ``(C) Definitions.--Any term used in this section which is 
     used in chapter 21 of title 46, United States Code, shall 
     have the meaning given such term under section 2101 of such 
     title.
       ``(3) Allocable amount.--The term `allocable amount' 
     means--
       ``(A) in the case in which a majority of the passengers on 
     any covered passenger cruise embark or disembark in the 
     United States, 100 percent of the gross receipts attributable 
     to such covered passenger cruise, and
       ``(B) in any other case, 50 percent of the gross receipts 
     attributable to such covered passenger cruise.
       ``(4) United states.--The term `United States' includes any 
     possession of the United States.''.
       (b) Conforming Amendment.--Subchapter B of chapter 36 of 
     the Internal Revenue Code of 1986 is amended by striking all 
     preceding section 4471 and inserting the following:

                ``Subchapter B--Transportation by Water

                      ``PART I--Per Passenger Tax

                       ``PART II--Ad Valorem Tax

                      ``PART I--PER PASSENGER TAX

``Sec. 4471. Imposition of tax.
``Sec. 4472. Definitions.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to voyages made after the date of the enactment 
     of this Act.

     SEC. 2. INTERMODAL INFRASTRUCTURE TRUST FUND.

       (a) In General.--Subchapter A of Chapter 98 of the Internal 
     Revenue Code of 1986 is amended by adding at the end the 
     following new section:

     ``SEC. 9512. INTERMODAL INFRASTRUCTURE TRUST FUND.

       ``(a) Creation of Trust Fund.--There is hereby established 
     in the Treasury of the United States a trust fund to be known 
     as the `Intermodal Infrastructure Trust Fund', consisting of 
     such amounts as may be appropriated or credited to the 
     Intermodal Infrastructure Trust Fund in this section or 
     section 9602(b).
       ``(b) Transfers to Intermodal Infrastructure Trust Fund.--
     There are hereby appropriated to the Intermodal 
     Infrastructure Trust Fund amounts equivalent to the taxes 
     received in the Treasury under section 4471.
       ``(c) Expenditures From Intermodal Infrastructure Trust 
     Fund.--Amounts in the Intermodal Infrastructure Trust Fund 
     shall be available, as provided in appropriations Acts, for 
     transportation improvement, including--
       ``(1) the construction or improvement of--
       ``(A) passenger or freight rail lines,
       ``(B) highways,
       ``(C) bridges,
       ``(D) airports,
       ``(E) air traffic control systems,
       ``(F) port or marine facilities,
       ``(G) inland waterways,
       ``(H) transmission or distribution pipelines,
       ``(I) public transportation facilities or systems
       ``(J) intercity passenger bus or passenger rail facilities 
     or equipment, and
       ``(K) freight rail facilities or equipment, and
       ``(2) planning, preparation, or design of any project 
     described in paragraph (1).''.
       (b) Clerical Amendment.--The table of sections for 
     subchapter A of Chapter 98 of such Code is amended by adding 
     at the end the following new item:

``Sec. 9512. Intermodal Infrastructure Trust Fund.''.
                                 ______