A bill to exclude deposits into a capital construction fund account under section 607(d) of the Merchant Marine Act from net earnings from self-employment.

Summary: Amends the Merchant Marine Act, 1936 and the Internal Revenue Code to permit participants in a capital construction fund to reduce their self-employment income by the amount of contributions to such fund. Makes nonqualified withdrawals subject to the self-employment tax.

SECTION 1. DEPOSITS IN CAPITAL CONSTRUCTION FUND ACCOUNT EXCLUDED FROM 
              NET EARNINGS FROM SELF-EMPLOYMENT.

    (a) In General.--Subparagraph (A) of section 607(d)(1) of the 
Merchant Marine Act, 1936 (46 U.S.C. 1177(d)(1)) is amended by striking 
``taxable income (determined without regard to this section and section 
7518 of such Code) for the taxable year shall be reduced'' and by 
inserting ``taxable income and net earnings from self-employment 
attributable to the operation of the agreement vessels (determined 
without regard to this section and section 7518 of such Code) for the 
taxable year shall each be reduced''.
    (b) Nonqualified Withdrawals.--Section 607(h) of the Merchant 
Marine Act, 1936 (46 U.S.C. 1177(h)) is amended by adding at the end 
thereof the following new paragraph:
            ``(7) Nonqualified withdrawals subject to self-employment 
        tax.--
                    ``(A) In general.--In the case of any taxable year 
                for which there is a nonqualified withdrawal (including 
                any amount so treated under paragraph (5)), the tax 
                imposed by section 1401 of the Internal Revenue Code of 
                1986 (at a rate for such taxable year unless otherwise 
                established by the taxpayer to the satisfaction of the 
                Secretary) shall be determined without regard to 
                section 230 of the Social Security Act (42 U.S.C. 430).
                    ``(B) Tax benefit rule.--If any portion of a 
                nonqualified withdrawal is properly attributable to 
                deposits (other than earnings on deposits) made by the 
                taxpayer in any taxable year which did not reduce the 
                taxpayer's liability for tax under section 1401 of such 
                Code for any taxable year preceding the taxable year in 
                which such withdrawal occurs, such portion shall not be 
                taken into account under subparagraph (A).''.
    (c) Conforming Amendments.--
            (1) Subparagraph (A) of section 7518(c)(1) of the Internal 
        Revenue Code of 1986 is amended by striking ``taxable income 
        (determined without regard to this section and section 607 of 
        the Merchant Marine Act, 1936) for the taxable year shall be 
        reduced'' and by inserting ``taxable income and net earnings 
        from self-employment attributable to the operation of the 
        agreement vessels (determined without regard to this section 
        and section 607 of the Merchant Marine Act, 1936) for the 
        taxable year shall each be reduced''.
            (2) Section 7518(g) of the Internal Revenue Code of 1986 is 
        amended by adding at the end thereof the following new 
        paragraph:
            ``(7) Nonqualified withdrawals subject to self-employment 
        tax.--
                    ``(A) In general.--In the case of any taxable year 
                for which there is a nonqualified withdrawal (including 
                any amount so treated under paragraph (5)), the tax 
                imposed by section 1401 (at a rate for such taxable 
                year unless otherwise established by the taxpayer to 
                the satisfaction of the Secretary) shall be determined 
                without regard to section 230 of the Social Security 
                Act (42 U.S.C. 430).
                    ``(B) Tax benefit rule.--If any portion of a 
                nonqualified withdrawal is properly attributable to 
                deposits (other than earnings on deposits) made by the 
                taxpayer in any taxable year which did not reduce the 
                taxpayer's liability for tax under section 1401 for any 
                taxable year preceding the taxable year in which such 
                withdrawal occurs, such portion shall not be taken into 
                account under subparagraph (A).''.
            (3) Section 1403(b) of the Internal Revenue Code of 1986 is 
        amended by adding the following new paragraph.
            ``(3) For treatment of earnings of ship contractors 
        deposited in special reserve funds, see subsections (d) and (h) 
        of section 607 of the Merchant Marine Act, 1936 (46 U.S.C. 
        1177) and subsections (c) and (g) of section 7518''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 1992.
            (2) Waiver of statute of limitations.--If on the date of 
        the enactment of this Act (or at any time within 1 year after 
        such date of enactment) refund or credit of any overpayment of 
        tax resulting from the application of the amendment made by 
        subsection (a) is barred by any law or rule of law, refund or 
        credit of such overpayment shall, nevertheless, be made or 
        allowed if claim therefore is filed before the date 1 year 
        after the date of the enactment of this Act.