I

103D CONGRESS

2D SESSION H. R. 3822

To amend the Merchant Marine Act, 1936, and the Internal Revenue Code

of 1986 to promote construction and operation of passenger vessels

in the United States, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 9, 1994

Mrs. UNSOELD (for herself, Mr. STUDDS, Mr. LIPINSKI, Mr. DICKS, Ms.

CANTWELL, Ms. DUNN, Mr. KRIEDLER, Mr. SWIFT, Mr. MANTON, Mr.

BORSKI, Mr. HOYER, Mr. CUNNINGHAM, and Mr. JOHNSON of South Dakota) introduced the following bill; which was referred jointly to the Committees on Merchant Marine and Fisheries and Ways and Means

A BILL

To amend the Merchant Marine Act, 1936, and the Internal

Revenue Code of 1986 to promote construction and operation of passenger vessels in the United States, and

for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘United States Pas5 senger Vessel Development Tax Act’’.
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1 SEC. 2. PURPOSE.

2 The purpose of this Act is to provide measures to en3 courage investment in new passenger vessels documented

4 under the laws of the United States.

5 SEC. 3. CHANGES TO CAPITAL CONSTRUCTION FUND.

6 (a) EXPANDING THE CCF PROGRAM TO PASSENGER

7 VESSELS IN DOMESTIC TRADES.—

8 (1) Paragraph (2) of section 607(k) of the Mer9 chant Marine Act, 1936 (46 App. U.S.C. 1177) is

10 amended by adding at the end thereof the following

11 new flush sentence:

12 ‘‘In the case of a passenger vessel, subparagraph (C)

13 (and the second sentence of subsection (a)) shall be

14 treated as including a reference to all domestic

15 trades.’’

16 (2) Paragraph (1) of section 607(k) of such Act

17 (defining eligible vessel) is amended by adding at the

18 end the following: ‘‘For purposes of subparagraph

19 (B), documentation under section 12113 of title 46,

20 United States Code (as added by H.R. 3821 of the

21 103d Congress), shall be treated as documentation

22 under the laws of the United States.’’

23 (b) TREATMENT OF FUND EARNINGS.—

24 (1) Section 607 of such Act is amended by add25 ing at the end thereof the following new subsection:
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1 ‘‘(n) TAXATION OF EARNINGS ON INVESTMENTS IN

2 CERTAIN FUNDS.—

3 ‘‘(1) IN GENERAL.—In the case of a capital

4 construction fund to which this subsection applies,

5 the tax imposed by chapter 1 of the Internal Reve6 nue Code of 1986 shall be determined—

7 ‘‘(A) by excluding from gross income the

8 taxable earnings from the investment and rein9 vestment of amounts held in such capital con10 struction fund, and

11 ‘‘(B) by increasing the tax imposed by

12 such chapter by the product of the amount of

13 such taxable earnings and the highest rate of

14 tax specified in section 1 (section 11 in the case

15 of a corporation) of such Code.

16 ‘‘(2) MAXIMUM RATE ON CAPITAL GAINS.—If

17 there is a net capital gain on amounts held in a cap18 ital construction fund to which this subsection ap19 plies, the rate of tax taken into account under para20 graph (1)(B) with respect to such gain shall not ex21 ceed the rate applicable to net capital gain under

22 section 1(h) or 1201(a) of such Code, as the case

23 may be.

24 ‘‘(3) FUNDS TO WHICH SUBSECTION AP25 PLIES.—This subsection shall apply to any capital
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1 construction fund into which amounts are deposited

2 by reason of the operation of a passenger vessel.

3 ‘‘(4) COORDINATION WITH DEDUCTION FOR

4 NET OPERATING LOSSES.—Any earnings excluded

5 from gross income under paragraph (1) shall be ex6 cluded in determining taxable income under section

7 172(b)(2) of such Code.

8 ‘‘(5) TAXABLE EARNINGS.—For purposes of

9 this section, the term ‘taxable earnings’ means net

10 earnings determined with the following modifica11 tions:

12 ‘‘(A) There shall be excluded interest in13 come exempt from taxation under section 103

14 of such Code.

15 ‘‘(B) If the person maintaining the fund is

16 a corporation, there shall be excluded the per17 centage applicable under section 243(a)(1) of

18 such Code of any dividend received by the fund

19 with respect to which such person would (but

20 for paragraph (1)(A)) be allowed a deduction

21 under section 243 of such Code.

22 ‘‘(C) Losses from the sale or exchange of

23 capital assets shall be allowed only to the extent

24 of gains from such sales or exchanges.

25 ‘‘(D) There shall be excluded—
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1 ‘‘(i) earnings on amounts deposited in

2 the fund which are attributable to vessels

3 documented under the laws of the United

4 States for operation in the fisheries of the

5 United States, and

6 ‘‘(ii) earnings on earnings described in

7 clause (i).’’

8 (2) Subparagraph (D) of section 607(b)(1) of

9 such Act is amended by inserting ‘‘reduced by the

10 tax (if any) imposed on such receipts under sub11 section (n)’’ after ‘‘in such fund’’.

12 (3) Subparagraph (C) of section 607(d)(1) of

13 such Act is amended by inserting ‘‘except as pro14 vided in subsection (n),’’ before ‘‘the earnings’’.

15 (4) Paragraph (2) of section 607(e) of such Act

16 is amended by striking ‘‘and’’ at the end of subpara17 graph (C), by striking the period at the end of sub18 paragraph (D) and inserting ‘‘, and’’, and by adding

19 at the end thereof the following new subparagraph:

20 ‘‘(E) in the case of any capital construc21 tion fund to which subsection (n) applies, the

22 taxable earnings (as defined in such subsection)

23 of such fund.’’
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1 (5) Paragraph (3) of section 607(e) of such Act

2 is amended by adding at the end thereof the follow3 ing new flush sentence:

4 ‘‘In the case of any capital construction fund to

5 which subsection (n) applies, the taxable earnings

6 (as defined in such subsection) of such fund shall

7 not be taken into account under this paragraph.’’

8 (6) Paragraph (4) of section 607(e) of such Act

9 is amended by adding at the end thereof the follow10 ing new flush sentence:

11 ‘‘In the case of any capital construction fund to

12 which subsection (n) applies, the taxable earnings

13 (as defined in such subsection) of such fund shall

14 not be taken into account under subparagraph (B),

15 and subparagraphs (C) and (E) shall not apply.’’

16 (7) Paragraph (1) of section 607(f) of such Act

17 is amended by striking ‘‘or’’ at the end of subpara18 graph (B), by striking the period at the end of sub19 paragraph (C) and inserting ‘‘, or’’, and by inserting

20 after subparagraph (C) the following new subpara21 graph:

22 ‘‘(D) the payment of the tax (if any) im23 posed by subsection (n).’’

24 (c) TREATMENT OF CERTAIN LEASE PAYMENTS.—
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1 (1) Paragraph (1) of section 607(f) of such Act

2 is amended by striking ‘‘or’’ at the end of subpara3 graph (C), by striking the period at the end of sub4 paragraph (D) and inserting ‘‘, or’’, and by inserting

5 after subparagraph (D) the following new subpara6 graph:

7 ‘‘(E) the payment of amounts which reduce

8 the principal amount (as determined under reg9 ulations) of a qualified lease of a passenger ves10 sel which is a qualified vessel.’’

11 (2) Paragraph (4) of section 607(g) of such Act

12 is amended by inserting ‘‘(or to reduce the principal

13 amount of any qualified lease a passenger vessel

14 which is a qualified vessel)’’ after ‘‘indebtedness’’.

15 (3) Subsection (k) of section 607 of such Act

16 is amended by adding at the end thereof the follow17 ing new paragraph:

18 ‘‘(10) The term ‘qualified lease’ means any

19 lease with a term of at least 5 years.’’

20 (d) COMPUTATION OF INTEREST WITH RESPECT TO

21 NONQUALIFIED WITHDRAWALS.—Paragraph (3) of sec22 tion 607(h) of such Act is amended by adding at the end

23 the following flush sentence:

24 ‘‘In the case of a withdrawal from a fund to which

25 subsection (n) applies, in lieu of applying subpara-
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1 graph (C), no addition to the tax shall be payable

2 under section 6651 of such Code and interest on the

3 amount of the additional tax attributable to any

4 item referred to in subparagraph (A) or (B) shall be

5 paid in accordance with section 6601 of such Code.’’

6 (e) PASSENGER VESSEL DESIGN AND ENGINEERING

7 COSTS MAY BE PAID FROM FUNDS.—Paragraph (1) of

8 section 607(f) of such Act is further amended by striking

9 ‘‘or’’ at the end of subparagraph (D), by striking the pe10 riod at the end of subparagraph (E) and inserting ‘‘, or’’,

11 and by inserting after subparagraph (E) the following new

12 subparagraph:

13 ‘‘(F) the design and engineering of any

14 construction or reconstruction of a qualified

15 vessel which is a passenger vessel.’’

16 (f) EXPANSION OF PERMITTED INVESTMENTS BY

17 PASSENGER VESSEL FUNDS.—Subsection (c) of section

18 607 of such Act is amended by inserting ‘‘(and, in the

19 case of a fund to which subsection (n) applies, other in20 come-producing assets (including accounts receivable)’’

21 after ‘‘interest-bearing securities’’.

22 (g) WITHDRAWALS PERMITTED FOR CERTAIN PRIOR

23 EXPENDITURES.—Paragraph (1) of section 607(f) of such

24 Act is further amended by striking ‘‘or’’ at the end of sub25 paragraph (E), by striking the period at the end of sub-
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1 paragraph (F) and inserting ‘‘, or’’, and by inserting after

2 subparagraph (F) the following new subparagraph:

3 ‘‘(G) the reimbursement of the person

4 maintaining the fund for amounts expended by

5 such person in the reconstruction of any vessel

6 for which an interim certificate of documenta7 tion was issued under section 12113 of title 46,

8 United States Code (as added by H.R. 3821 of

9 the 103d Congress).’’

10 (h) AMOUNTS IN CAPITAL CONSTRUCTION FUND BY

11 REASON OF INTERIM CERTIFICATE VESSEL REQUIRED

12 TO BE COMMITTED TO CONSTRUCTION OF NEW QUALI13 FIED VESSEL.—Section 607 of the Merchant Marine Act,

14 1936, is amended by adding at the end the following new

15 subsection:

16 ‘‘(o) TAX ON INTERIM CERTIFICATE VESSEL DEPOS17 ITS IN FUND WHICH ARE NOT COMMITTED TO NEW

18 CONSTRUCTION, ETC.—

19 ‘‘(1) TAX IMPOSED IF CONTRACT FOR CON20 STRUCTION OF QUALIFIED VESSEL NOT ENTERED

21 INTO WITHIN 3 YEARS.—If any person deposits any

22 amount into a capital construction fund by reason of

23 the treatment provided by the last sentence of sub24 section (k)(1), and such person fails to enter into a

25 qualified contract within the period of 3 years after
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1 the date the certificate referred to in such sentence

2 was issued—

3 ‘‘(A) such fund shall, at the close of such

4 period, cease to be treated as a capital con5 struction fund and shall be treated as distribut6 ing all amounts in such fund to such person,

7 and

8 ‘‘(B) such person’s tax imposed by chapter

9 1 of the Internal Revenue Code of 1986 for the

10 taxable year in which such period ends shall be

11 determined—

12 ‘‘(i) by excluding from gross income

13 the amount treated as distributed under

14 subparagraph (A), and

15 ‘‘(ii) by increasing the tax imposed by

16 such chapter by the product of such

17 amount and the highest rate of tax speci18 fied in section 1 (section 11 in the case of

19 a corporation) of such Code.

20 ‘‘(2) TAX ON WITHDRAWALS NOT USED IN FUR21 THERANCE OF CONSTRUCTION CONTRACT.—If there

22 is a withdrawal from a fund referred to in para23 graph (1) which is not in furtherance of entering

24 into a qualified contract within such 3 year period,

25 such withdrawal shall not be taxed as otherwise pro-
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1 vided in this section and such person’s tax imposed

2 by chapter 1 of such Code for the taxable year in

3 which such withdrawal is made shall be deter4 mined—

5 ‘‘(A) by excluding such withdrawal from

6 gross income, and

7 ‘‘(B) by increasing the tax imposed by

8 such chapter by the product of the amount of

9 such withdrawal and the highest rate of tax

10 specified in section 1 (section 11 in the case of

11 a corporation) of such Code.

12 ‘‘(3) QUALIFIED CONTRACT.—For purposes of

13 this subsection, the term ‘qualified contract’ means

14 any contract for the construction of a new qualified

15 vessel the consideration for which will be paid from

16 the capital construction fund referred to in para17 graph (1).

18 ‘‘(4) COORDINATION WITH DEDUCTION FOR

19 NET OPERATING LOSSES.—Any amount excluded

20 from gross income under this subsection shall be ex21 cluded in determining taxable income under section

22 172(b)(2) of such Code.’’

23 SEC. 4. AMENDMENTS OF INTERNAL REVENUE CODE OF

24 1986.

25 (a) TREATMENT OF FUND EARNINGS.—
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1 (1) Section 7518 of the Internal Revenue Code

2 of 1986 is amended by redesignating subsections (h)

3 and (i) as subsections (j) and (k), respectively, and

4 by inserting after subsection (g) the following new

5 subsection:

6 ‘‘(h) TAXATION OF EARNINGS ON INVESTMENT IN

7 CERTAIN FUNDS.—

8 ‘‘(1) IN GENERAL.—In the case of a capital

9 construction fund to which this subsection applies,

10 the tax imposed by chapter 1 shall be determined—

11 ‘‘(A) by excluding from gross income the

12 earnings from the investment and reinvestment

13 of amounts held in such capital construction

14 fund, and

15 ‘‘(B) by increasing the tax imposed by

16 such chapter by the product of the amount of

17 such earnings and the highest rate of tax speci18 fied in section 1 (section 11 in the case of a

19 corporation).

20 ‘‘(2) MAXIMUM RATE ON CAPITAL GAINS.—If

21 there is a net capital gain on amounts held in a cap22 ital construction fund to which this subsection ap23 plies, the rate of tax taken into account under para24 graph (1)(B) with respect to such gain shall not ex-
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1 ceed the rate applicable to net capital gain under

2 section 1(h) or 1201(a), as the case may be.

3 ‘‘(3) FUNDS TO WHICH SUBSECTION AP4 PLIES.—This subsection shall apply to any capital

5 construction fund into which amounts are deposited

6 by reason of the operation of a passenger vessel.

7 ‘‘(4) COORDINATION WITH DEDUCTION FOR

8 NET OPERATING LOSSES.—Any earnings excluded

9 from gross income under paragraph (1) shall be ex10 cluded in determining taxable income under section

11 172(b)(2).

12 ‘‘(5) TAXABLE EARNINGS.—For purposes of

13 this section, the term ‘taxable earnings’ means net

14 earnings determined with the following modifica15 tions:

16 ‘‘(A) There shall be excluded interest in17 come exempt from taxation under section 103.

18 ‘‘(B) If the person maintaining the fund is

19 a corporation, there shall be excluded the per20 centage applicable under section 243(a)(1) of

21 any dividend received by the fund with respect

22 to which such person would (but for paragraph

23 (1)(A)) be allowed a deduction under section

24 243.
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1 ‘‘(C) Losses from the sale or exchange of

2 capital assets shall be allowed only to the extent

3 of gains from such sales or exchanges.

4 ‘‘(D) There shall be excluded—

5 ‘‘(i) earnings on amounts deposited in

6 the fund which are attributable to vessels

7 documented under the laws of the United

8 States for operation in the fisheries of the

9 United States, and

10 ‘‘(ii) earnings on earnings described in

11 clause (i).’’

12 (2) Subparagraph (D) of section 7518(a)(1) of

13 such Code is amended by inserting ‘‘reduced by the

14 tax (if any) imposed on such receipts under sub15 section (h)’’ after ‘‘in such fund’’.

16 (3) Subparagraph (C) of section 7518(c)(1) of

17 such Code is amended by inserting ‘‘except as pro18 vided in subsection (h),’’ before ‘‘the earnings’’.

19 (4) Paragraph (2) of section 7518(d) of such

20 Code is amended by striking ‘‘and’’ at the end of

21 subparagraph (C), by striking the period at the end

22 of subparagraph (D) and inserting ‘‘, and’’, and by

23 adding at the end thereof the following new subpara24 graph:
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1 ‘‘(E) in the case of any capital construc2 tion fund to which subsection (h) applies, the

3 taxable earnings (as defined in such subsection)

4 of such fund.’’

5 (5) Paragraph (3) of section 7518(d) of such

6 Code is amended by adding at the end thereof the

7 following new flush sentence:

8 ‘‘In the case of any capital construction fund to

9 which subsection (h) applies, the taxable earnings

10 (as defined in such subsection) of such fund shall

11 not be taken into account under this paragraph.’’

12 (6) Paragraph (4) of section 7518(d) of such

13 Code is amended by adding at the end thereof the

14 following new flush sentence:

15 ‘‘In the case of any capital construction fund to

16 which subsection (h) applies, the taxable earnings

17 (as defined in such subsection) of such fund shall

18 not be taken into account under subparagraph (B),

19 and subparagraphs (C) and (E) shall not apply.’’

20 (7) Paragraph (1) of section 7518(g) of such

21 Code is amended by striking ‘‘subsection (h)’’ and

22 inserting ‘‘subsection (i)’’.

23 (8) Paragraph (1) of section 7518(e) of such

24 Code is amended by striking ‘‘or’’ at the end of sub25 paragraph (B), by striking the period at the end of
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1 subparagraph (C) and inserting ‘‘, or’’, and by in2 serting after subparagraph (C) the following new

3 subparagraph:

4 ‘‘(D) the payment of the tax (if any) im5 posed by subsection (h).’’

6 (b) TREATMENT OF CERTAIN LEASE PAYMENTS.—

7 (1) Paragraph (1) of section 7518(e) of such

8 Code is amended by striking ‘‘or’’ at the end of sub9 paragraph (C), by striking the period at the end of

10 subparagraph (D) and inserting ‘‘, or’’, and by in11 serting after subparagraph (D) the following new

12 subparagraph:

13 ‘‘(E) the payment of amounts which reduce

14 the principal amount (as determined under reg15 ulations) of a qualified lease of a passenger ves16 sel which is a qualified vessel.’’

17 (2) Paragraph (4) of section 7518(f) of such

18 Code is amended by inserting ‘‘(or to reduce the

19 principal amount of any qualified lease of a pas20 senger vessel which is a qualified vessel)’’ after ‘‘in21 debtedness’’.

22 (c) COMPUTATION OF INTEREST WITH RESPECT TO

23 NONQUALIFIED WITHDRAWALS.—Paragraph (3) of sec24 tion 7518(g) of such Code is amended by adding at the

25 end the following flush sentence:
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1 ‘‘In the case of a withdrawal from a fund to which

2 subsection (n) applies, in lieu of applying subpara3 graph (C), no addition to the tax shall be payable

4 under section 6651 and interest on the amount of

5 the additional tax attributable to any item referred

6 to in subparagraph (A) or (B) shall be paid in ac7 cordance with section 6601.’’

8 (d) PASSENGER VESSEL DESIGN AND ENGINEERING

9 COSTS MAY BE PAID FROM FUNDS.—Paragraph (1) of

10 section 7518(e) of such Code is further amended by strik11 ing ‘‘or’’ at the end of subparagraph (D), by striking the

12 period at the end of subparagraph (E) and inserting ‘‘,

13 or’’, and by inserting after subparagraph (E) the following

14 new subparagraph:

15 ‘‘(F) the design and engineering of any

16 construction or reconstruction of a qualified

17 vessel which is a passenger vessel.’’

18 (e) EXPANSION OF PERMITTED INVESTMENTS BY

19 PASSENGER VESSEL FUNDS.—Paragraph (2) of section

20 7518(b) of such Code is amended by inserting ‘‘(and, in

21 the case of a fund to which subsection (n) applies, other

22 income-producing assets (including accounts receivable)’’

23 after ‘‘interest-bearing securities’’.

24 (f) WITHDRAWALS PERMITTED FOR CERTAIN PRIOR

25 EXPENDITURES.—Paragraph (1) of section 7518(e) of
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1 such Code is further amended by striking ‘‘or’’ at the end

2 of subparagraph (E), by striking the period at the end

3 of subparagraph (F) and inserting ‘‘, or’’, and by inserting

4 after subparagraph (F) the following new subparagraph:

5 ‘‘(G) the reimbursement of the person

6 maintaining the fund for amounts expended by

7 such person in the reconstruction of any vessel

8 for which an interim certificate of documenta9 tion was issued under section 12113 of title 46,

10 United States Code (as added by H.R. 3821 of

11 the 103d Congress).’’

12 (g) AMOUNTS IN CAPITAL CONSTRUCTION FUND BY

13 REASON OF INTERIM CERTIFICATE VESSEL REQUIRED

14 TO BE COMMITTED TO CONSTRUCTION OF NEW QUALI15 FIED VESSEL.—Section 7518 of such Code is amended by

16 inserting after subsection (h) the following new subsection:

17 ‘‘(i) TAX ON INTERIM CERTIFICATE VESSEL DEPOS18 ITS IN FUND WHICH ARE NOT COMMITTED TO NEW

19 CONSTRUCTION, ETC.—

20 ‘‘(1) TAX IMPOSED IF CONTRACT FOR CON21 STRUCTION OF QUALIFIED VESSEL NOT ENTERED

22 INTO WITHIN 3 YEARS.—If any person deposits any

23 amount into a capital construction fund by reason of

24 the treatment provided by the last sentence of sec25 tion 607(k)(1) of the Merchant Marine Act, 1936,
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1 and such person fails to enter into a qualified con2 tract within the period of 3 years after the date the

3 certificate referred to in such sentence was issued—

4 ‘‘(A) such fund shall, at the close of such

5 period, cease to be treated as a capital con6 struction fund and shall be treated as distribut7 ing all amounts in such fund to such person,

8 and

9 ‘‘(B) such person’s tax imposed by chapter

10 1 for the taxable year in which such period ends

11 shall be determined—

12 ‘‘(i) by excluding from gross income

13 the amount treated as distributed under

14 subparagraph (A), and

15 ‘‘(ii) by increasing the tax imposed by

16 chapter 1 by the product of such amount

17 and the highest rate of tax specified in sec18 tion 1 (section 11 in the case of a corpora19 tion).

20 ‘‘(2) TAX ON WITHDRAWALS NOT USED IN FUR21 THERANCE OF CONSTRUCTION CONTRACT.—If there

22 is a withdrawal from a fund referred to in para23 graph (1) which is not in furtherance of entering

24 into a qualified contract within such 3 year period,

25 such withdrawal shall not be taxed as otherwise pro-
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1 vided in this section and such person’s tax imposed

2 by chapter 1 for the taxable year in which such

3 withdrawal is made shall be determined—

4 ‘‘(A) by excluding such withdrawal from

5 gross income, and

6 ‘‘(B) by increasing the tax imposed by

7 chapter 1 by the product of the amount of such

8 withdrawal and the highest rate of tax specified

9 in section 1 (section 11 in the case of a cor10 poration).

11 ‘‘(3) QUALIFIED CONTRACT.—For purposes of

12 this subsection, the term ‘qualified contract’ means

13 any contract for the construction of a new qualified

14 vessel the consideration for which will be paid from

15 the capital construction fund referred to in para16 graph (1).

17 ‘‘(4) COORDINATION WITH DEDUCTION FOR

18 NET OPERATING LOSSES.—Any amount excluded

19 from gross income under this subsection shall be ex20 cluded in determining taxable income under section

21 172(b)(2).’’

22 (h) OTHER CHANGES.—

23 (1) Subsection (j) of section 7518 of such Code

24 is amended by striking ‘‘this section.’’ and inserting
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1 ‘‘the United States Passenger Vessel Development

2 Tax Act.’’

3 (2) Subparagraph (B) of section 543(a)(1) of

4 such Code is amended to read as follows:

5 ‘‘(B) interest on amounts set aside in a capital

6 construction fund under section 607 of the Merchant

7 Marine Act, 1936 (46 App. U.S.C. 1177), or in a

8 construction reserve fund under section 511 of such

9 Act (46 App. U.S.C. 1161),’’.

10 (3) Subsection (c) of section 56 is amended by

11 striking paragraph (2) and by redesignating para12 graph (3) as paragraph (2).

13 SEC. 5. 3-YEAR RECOVERY PERIOD FOR UNITED STATES

14 FLAG PASSENGER VESSELS.

15 (a) IN GENERAL.—Subparagraph (A) of section

16 168(e)(3) of the Internal Revenue Code of 1986 is amend17 ed by striking ‘‘and’’ at the end of clause (i), by striking

18 the period at the end of clause (ii) and inserting ‘‘, and’’,

19 and by adding at the end thereof the following:

20 ‘‘(iii) any eligible vessel (as defined in

21 section 607(k)(1) of the Merchant Marine

22 Act, 1936) which is a passenger vessel, but

23 only if the original use of such vessel and

24 containers commences with the taxpayer.’’

25 (b) MINIMUM TAX TREATMENT.—
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1 (1) Subparagraph (B) of section 56(a)(1) of

2 such Code is amended by inserting before the period

3 ‘‘or in paragraph (3)(A)(iii) of section 168(e)’’.

4 (2) Clause (v) of section 56(g)(4)(A) of such

5 Code is amended by inserting ‘‘or in paragraph

6 (3)(A)(iii) of section 168(e)’’ after ‘‘section 168(f)’’.

7 SEC. 6. MODIFICATION OF LIMITATIONS ON DEDUCTIONS

8 FOR ATTENDANCE AT CONVENTIONS, ETC.

9 ON CRUISE SHIPS.

10 (a) ONLY HOME PORT OF CRUISE SHIP MUST BE

11 IN UNITED STATES OR POSSESSIONS.—Subparagraph

12 (B) of section 274(h)(2) of the Internal Revenue Code of

13 1986 (relating to conventions on cruise ships) is amended

14 to read as follows:

15 ‘‘(B) the home port of such cruise ship is

16 located in the United States or a possession of

17 the United States.’’

18 (b) REPEAL OF $2,000 LIMITATION.—Paragraph (2)

19 of section 274(h) of such Code is amended by striking the

20 last sentence.

21 (c) ONLY 1 REPORTING REQUIREMENT.—Subpara22 graph (A) of section 274(h)(5) of such Code is amended

23 by striking ‘‘and’’ at the end and inserting ‘‘or’’.

24 (d) INTERIM DOCUMENTATION TREATED AS REG25 ISTRATION.—Paragraph (2) of section 274(h) of such
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1 Code is amended by adding at the end thereof the follow2 ing flush sentence:

3 ‘‘For purposes of subparagraph (A), documentation

4 under section 12113 of title 46, United States Code

5 (as added by H.R. 3821 of the 103d Congress), shall

6 be treated as registration in the United States.’’

7 SEC. 7. EMPLOYER INCENTIVES FOR TRAVEL AWARDS.

8 (a) CREDIT FOR CERTAIN TRAVEL AWARDS.—

9 (1) IN GENERAL.—Subpart B of part IV of

10 subchapter A of chapter 1 of the Internal Revenue

11 Code of 1986 is amended by adding at the end

12 thereof the following new section:

13 ‘‘SEC. 30A. EMPLOYEE AWARDS FOR TRAVEL ON DOMESTIC

14 CRUISE SHIPS.

15 ‘‘(a) GENERAL RULE.—In the case of an employer,

16 there shall be allowed as a credit against the tax imposed

17 by this section an amount equal to 10 percent of the

18 amount paid or incurred by the taxpayer as a qualified

19 travel award for an employee of the taxpayer.

20 ‘‘(b) MAXIMUM CREDIT.—The credit allowed by sub21 section (a) for awards made to an employee during the

22 taxable year shall not exceed $200.

23 ‘‘(c) QUALIFIED TRAVEL AWARD.—For purposes of

24 this section, the term ‘qualified travel award’ means any
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1 award in recognition of an achievement by an employee

2 for travel on any cruise ship—

3 ‘‘(1) which is registered in the United States,

4 and

5 ‘‘(2) the home port of which is located in the

6 United States or a possession of the United States.

7 For purposes of paragraph (1), documentation under sec8 tion 12113 of title 46, United States Code (as added by

9 H.R. 3821 of the 103d Congress), shall be treated as reg10 istration in the United States.’’

11 ‘‘(d) APPLICATION WITH OTHER CREDITS.—The

12 credit allowed by subsection (a) for any taxable year shall

13 not exceed the excess (if any) of—

14 ‘‘(1) the regular tax for the taxable year re15 duced by the sum of the credits allowable under sub16 part A and sections 27, 28, 29, and 30, over

17 ‘‘(2) the tentative minimum tax for the taxable

18 year.’’

19 (2) CLERICAL AMENDMENT.—The table of sec20 tions for such subpart B is amended by adding at

21 the end thereof the following new item:

‘‘Sec. 30A. Employee awards for travel on domestic cruise ships.’’

22 (b) REDUCTION OF DEDUCTION FOR TRAVEL ON

23 FOREIGN CRUISE SHIPS.—Subsection (m) of section 274

24 of such Code (relating to additional limitations on travel
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1 expenses) is amended by adding at the end the following

2 new paragraph:

3 ‘‘(3) FOREIGN CRUISE SHIPS.—

4 ‘‘(A) IN GENERAL.—The amount allowable

5 as a deduction under this chapter for expenses

6 incurred for transportation on any foreign

7 cruise ship shall not exceed 90 percent of the

8 amount of such expenses which would (but for

9 this paragraph) be allowable as a deduction

10 under this chapter.

11 ‘‘(B) FOREIGN CRUISE SHIP.—For pur12 poses of subparagraph (A), the term ‘foreign

13 cruise ship’ means any cruise ship which does

14 not meet the requirements of subparagraphs

15 (A) and (B) of section 274(h)(2).’’

16 SEC. 8. EFFECTIVE DATES.

17 (a) IN GENERAL.—Except as otherwise provided in

18 this section, the amendments made by this Act shall apply

19 to taxable years beginning after the date of the enactment

20 of this Act.

21 (b) DEFINITION OF QUALIFIED VESSEL.—The

22 amendments made by section 3(a) shall apply for purposes

23 of determining whether any withdrawal made after De24 cember 31, 1992, is a qualified withdrawal (within the
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1 meaning of section 607(f) of the Merchant Marine Act,

2 1936, as in effect after such amendments).

3 (c) TAXATION OF EARNINGS.—The amendments

4 made by sections 3(b) and 4(a) shall apply to earnings

5 after December 31, 1992, in taxable years ending after

6 such date.

7 (d) CHANGES IN COMPUTATION OF INTEREST.—The

8 amendments made by sections 3(d) and 4(c) shall apply

9 to withdrawals made after December 31, 1992.

10 (e) QUALIFIED LEASES.—The amendments made by

11 sections 3(c) and 4(b) shall apply to leases in effect on,

12 or entered into after, December 31, 1992.

13 (f) DEPRECIATION.—The amendments made by sec14 tion 5 shall apply to property placed in service after De15 cember 31, 1992, in taxable years ending after such date.

16 (g) EFFECTIVE DATE.—The amendments made by

17 section 6 shall apply to cruises beginning after the date

18 of the enactment of this Act.

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