Collapse to view only § 1352. Alternative tax on qualifying shipping activities
- § 1352. Alternative tax on qualifying shipping activities
- § 1353. Notional shipping income
- § 1354. Alternative tax election; revocation; termination
- § 1355. Definitions and special rules
- § 1356. Qualifying shipping activities
- § 1357. Items not subject to regular tax; depreciation; interest
- § 1358. Allocation of credits, income, and deductions
- § 1359. Disposition of qualifying vessels
§ 1352. Alternative tax on qualifying shipping activitiesIn the case of an electing corporation, the tax imposed by section 11 shall be the amount equal to the sum of—
(1) the tax imposed by section 11 determined after the application of this subchapter, and
(2) a tax equal to—
(A) the highest rate of tax specified in section 11, multiplied by
(B) the notional shipping income for the taxable year.
(Added Pub. L. 108–357, title II, § 248(a), Oct. 22, 2004, 118 Stat. 1450.)
§ 1353. Notional shipping income
(a) In general
(b) Amounts
(1) In general
For purposes of subsection (a), the amount of notional shipping income of an electing corporation for each qualifying vessel for the taxable year shall equal the product of—
(A) the daily notional shipping income, and
(B) the number of days during the taxable year that the electing corporation operated such vessel as a qualifying vessel in United States foreign trade.
(2) Treatment of vessels the income from which is not otherwise subject to tax
(c) Daily notional shipping income
For purposes of subsection (b), the daily notional shipping income from the operation of a qualifying vessel is—
(1) 40 cents for each 100 tons of so much of the net tonnage of the vessel as does not exceed 25,000 net tons, and
(2) 20 cents for each 100 tons of so much of the net tonnage of the vessel as exceeds 25,000 net tons.
(d) Multiple operators of vessel
(Added Pub. L. 108–357, title II, § 248(a), Oct. 22, 2004, 118 Stat. 1450; amended Pub. L. 109–135, title IV, § 403(g)(1)(A), Dec. 21, 2005, 119 Stat. 2624.)
§ 1354. Alternative tax election; revocation; termination
(a) In general
(b) Time and manner; years for which effective
An election under this subchapter—
(1) shall be made in such form as prescribed by the Secretary, and
(2) shall be effective for the taxable year for which made and all succeeding taxable years until terminated under subsection (d).
Such election may be effective for any taxable year only if made on or before the due date (including extensions) for filing the corporation’s return for such taxable year.
(c) Consistent elections by members of controlled groups
(d) Termination
(1) By revocation
(A) In general
(B) When effective
Except as provided in subparagraph (C)—
(i) a revocation made during the taxable year and on or before the 15th day of the 4th month thereof shall be effective on the 1st day of such taxable year, and
(ii) a revocation made during the taxable year but after such 15th day shall be effective on the 1st day of the following taxable year.
(C) Revocation may specify prospective date
(2) By person ceasing to be qualifying vessel operator
(A) In general
(B) When effective
(C) Annualization
(e) Election after termination
(Added Pub. L. 108–357, title II, § 248(a), Oct. 22, 2004, 118 Stat. 1451; amended Pub. L. 109–135, title IV, § 403(g)(4), Dec. 21, 2005, 119 Stat. 2624; Pub. L. 114–41, title II, § 2006(a)(2)(C), July 31, 2015, 129 Stat. 457.)
§ 1355. Definitions and special rules
(a) Definitions
For purposes of this subchapter—
(1) Electing corporation
(2) Electing group; controlled group
(A) Electing group
(B) Controlled group
(3) Qualifying vessel operator
The term “qualifying vessel operator” means any corporation—
(A) who operates one or more qualifying vessels, and
(B) who meets the shipping activity requirement in subsection (c).
(4) Qualifying vessel
(5) United States flag vessel
(6) United States domestic trade
(7) United States foreign trade
(b) Operating a vessel
For purposes of this subchapter—
(1) In general
Except as provided in paragraph (2), a person is treated as operating any vessel during any period if—
(A)
(i) such vessel is owned by, or chartered (including a time charter) to, the person, or
(ii) the person provides services for such vessel pursuant to an operating agreement, and
(B) such vessel is in use as a qualifying vessel during such period.
(2) Bareboat charters
A person is treated as operating and using a vessel that it has chartered out on bareboat charter terms only if—
(A)
(i) the vessel is temporarily surplus to the person’s requirements and the term of the charter does not exceed 3 years, or
(ii) the vessel is bareboat chartered to a member of a controlled group which includes such person or to an unrelated person who sub-bareboats or time charters the vessel to such a member (including the owner of the vessel), and
(B) the vessel is used as a qualifying vessel by the person to whom ultimately chartered.
(c) Shipping activity requirement
For purposes of this section—
(1) In general
(2) Special rule for 1st year of election
(3) Controlled groups
(4) Requirement
(d) Activities carried on partnerships, etc.
In applying this subchapter to a partner in a partnership—
(1) each partner shall be treated as operating vessels operated by the partnership,
(2) each partner shall be treated as conducting the activities conducted by the partnership, and
(3) the extent of a partner’s ownership, charter, or operating agreement interest in any vessel operated by the partnership shall be determined on the basis of the partner’s interest in the partnership.
A similar rule shall apply with respect to other pass-thru entities.
(e) Effect of temporarily ceasing to operate a qualifying vessel
(1) In general
For purposes of subsections (b) and (c), an electing corporation shall be treated as continuing to use a qualifying vessel during any period of temporary cessation if the electing corporation gives timely notice to the Secretary stating—
(A) that it has temporarily ceased to operate the qualifying vessel, and
(B) its intention to resume operating the qualifying vessel.
(2) Notice
(3) Period disregard in effect
The period of temporary cessation under paragraph (1) shall continue until the earlier of the date on which—
(A) the electing corporation abandons its intention to resume operation of the qualifying vessel, or
(B) the electing corporation resumes operation of the qualifying vessel.
(f) Effect of temporarily operating a qualifying vessel in the United States domestic trade
(1) In general
For purposes of this subchapter, an electing corporation shall be treated as continuing to use a qualifying vessel in the United States foreign trade during any period of temporary use in the United States domestic trade if the electing corporation gives timely notice to the Secretary stating—
(A) that it temporarily operates or has operated in the United States domestic trade a qualifying vessel which had been used in the United States foreign trade, and
(B) its intention to resume operation of the vessel in the United States foreign trade.
(2) Notice
(3) Period disregard in effect
The period of temporary use under paragraph (1) continues until the earlier of the date on which—
(A) the electing corporation abandons its intention to resume operations of the vessel in the United States foreign trade, or
(B) the electing corporation resumes operation of the vessel in the United States foreign trade.
(4) No disregard if domestic trade use exceeds 30 days
(g) Great Lakes domestic shipping to not disqualify vessel
(1) In general
If the electing corporation elects (at such time and in such manner as the Secretary may require) to apply this subsection for any taxable year to any qualifying vessel which is used in qualified zone domestic trade during the taxable year—
(A) solely for purposes of subsection (a)(4), such use shall be treated as use in United States foreign trade (and not as use in United States domestic trade), and
(B) subsection (f) shall not apply with respect to such vessel for such taxable year.
(2) Effect of temporarily operating vessel in United States domestic trade
In the case of a qualifying vessel to which this subsection applies—
(A) In general
An electing corporation shall be treated as using such vessel in qualified zone domestic trade during any period of temporary use in the United States domestic trade (other than qualified zone domestic trade) if the electing corporation gives timely notice to the Secretary stating—
(i) that it temporarily operates or has operated in the United States domestic trade (other than qualified zone domestic trade) a qualifying vessel which had been used in the United States foreign trade or qualified zone domestic trade, and
(ii) its intention to resume operation of the vessel in the United States foreign trade or qualified zone domestic trade.
(B) Notice
(C) Period disregard in effect
The period of temporary use under subparagraph (A) continues until the earlier of the date of which—
(i) the electing corporation abandons its intention to resume operations of the vessel in the United States foreign trade or qualified zone domestic trade, or
(ii) the electing corporation resumes operation of the vessel in the United States foreign trade or qualified zone domestic trade.
(D) No disregard if domestic trade use exceeds 30 days
(3) Allocation of income and deductions to qualifying shipping activities
(4) Qualified zone domestic trade
For purposes of this subsection—
(A) In general
(B) Qualified zone
(h) Regulations
(Added Pub. L. 108–357, title II, § 248(a), Oct. 22, 2004, 118 Stat. 1452; amended Pub. L. 109–135, title IV, § 403(g)(1)(B)–(2), Dec. 21, 2005, 119 Stat. 2624; Pub. L. 109–222, title II, § 205(a), May 17, 2006, 120 Stat. 350; Pub. L. 109–432, div. A, title IV, §§ 413(a), 415(a), Dec. 20, 2006, 120 Stat. 2963; Pub. L. 115–141, div. U, title IV, § 401(a)(187), Mar. 23, 2018, 132 Stat. 1193.)
§ 1356. Qualifying shipping activities
(a) Qualifying shipping activitiesFor purposes of this subchapter, the term “qualifying shipping activities” means—
(1) core qualifying activities,
(2) qualifying secondary activities, and
(3) qualifying incidental activities.
(b) Core qualifying activities
(c) Qualifying secondary activitiesFor purposes of this section—
(1) In general
(2) Secondary activitiesThe term “secondary activities” means—
(A) the active management or operation of vessels other than qualifying vessels in the United States foreign trade,
(B) the provision of vessel, barge, container, or cargo-related facilities or services to any person,
(C) other activities of the electing corporation and other members of its electing group that are an integral part of its business of operating qualifying vessels in United States foreign trade, including—
(i) ownership or operation of barges, containers, chassis, and other equipment that are the complement of, or used in connection with, a qualifying vessel in United States foreign trade,
(ii) the inland haulage of cargo shipped, or to be shipped, on qualifying vessels in United States foreign trade, and
(iii) the provision of terminal, maintenance, repair, logistical, or other vessel, barge, container, or cargo-related services that are an integral part of operating qualifying vessels in United States foreign trade, and
(D) such other activities as may be prescribed by the Secretary pursuant to regulations.
Such term shall not include any core qualifying activities.
(d) Qualifying incidental activitiesFor purposes of this section, the term “qualified incidental activities” means shipping-related activities if—
(1) they are incidental to the corporation’s core qualifying activities,
(2) they are not qualifying secondary activities, and
(3) without regard to this subchapter, the gross income derived by such corporation from such activities does not exceed 0.1 percent of the corporation’s gross income from its core qualifying activities.
(e) Application of gross income tests in case of electing group
(Added Pub. L. 108–357, title II, § 248(a), Oct. 22, 2004, 118 Stat. 1454; amended Pub. L. 109–135, title IV, § 403(g)(3), Dec. 21, 2005, 119 Stat. 2624.)
§ 1357. Items not subject to regular tax; depreciation; interest
(a) Exclusion from gross income
(b) Electing group member
(c) Denial of losses, deductions, and credits
(1) General rule
(2) Depreciation
(A) In general
(B) Method
(i) In general
(ii) Exception
(3) Interest
(A) In general
(B) Electing group
(Added Pub. L. 108–357, title II, § 248(a), Oct. 22, 2004, 118 Stat. 1455.)
§ 1358. Allocation of credits, income, and deductions
(a) Qualifying shipping activities
(b) Exclusion of credits or deductions
(1) No deduction shall be allowed against the notional shipping income of an electing corporation, and no credit shall be allowed against the tax imposed by section 1352(2).
(2) No deduction shall be allowed for any net operating loss attributable to the qualifying shipping activities of any person to the extent that such loss is carried forward by such person from a taxable year preceding the first taxable year for which such person was an electing corporation.
(c) Transactions not at arm’s length
Section 482 applies in accordance with this subsection to a transaction or series of transactions—
(1) as between an electing corporation and another person, or
(2) as between a person’s qualifying shipping activities and other activities carried on by it.
(Added Pub. L. 108–357, title II, § 248(a), Oct. 22, 2004, 118 Stat. 1456; amended Pub. L. 115–141, div. U, title IV, § 401(a)(188), (189), Mar. 23, 2018, 132 Stat. 1193.)
§ 1359. Disposition of qualifying vessels
(a) In general
(b) Period within which property must be replaced
The period referred to in subsection (a) shall be the period beginning one year prior to the disposition of the qualifying vessel and ending—
(1) 3 years after the close of the first taxable year in which the gain is realized, or
(2) subject to such terms and conditions as may be specified by the Secretary, on such later date as the Secretary may designate on application by the taxpayer.
Such application shall be made at such time and in such manner as the Secretary may by regulations prescribe.
(c) Application of section to noncorporate operators
(d) Time for assessment of deficiency attributable to gain
If a qualifying vessel operator has made the election provided in subsection (a), then—
(1) the statutory period for the assessment of any deficiency, for any taxable year in which any part of the gain is realized, attributable to such gain shall not expire prior to the expiration of 3 years from the date the Secretary is notified by such operator (in such manner as the Secretary may by regulations prescribe) of the replacement qualifying vessel or of an intention not to replace, and
(2) such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of section 6212(c) or the provisions of any other law or rule of law which would otherwise prevent such assessment.
(e) Basis of replacement qualifying vessel
(Added Pub. L. 108–357, title II, § 248(a), Oct. 22, 2004, 118 Stat. 1456.)