I

106TH CONGRESS

1ST SESSION H. R. 2159

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

of 1986 to revitalize the international competitiveness of the United

States-flag merchant marine.

IN THE HOUSE OF REPRESENTATIVES

JUNE 10, 1999

Mr. MCCRERY (for himself, Mr. HERGER, Mr. JEFFERSON, and Mr. ABERCROMBIE) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committees on Transportation and Infrastructure, and Armed Services, for a period to be subsequently determined by the Speaker, in each case for consideration of

such provisions as fall within the jurisdiction of the committee concerned

A BILL

To amend the Merchant Marine Act, 1936 and the Internal

Revenue Code of 1986 to revitalize the international

competitiveness of the United States-flag merchant marine.

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-Flag

5 Merchant Marine Revitalization Act of 1999’’.
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1 SEC. 2. AMENDMENTS OF MERCHANT MARINE ACT, 1936.

2 (a) CHANGES IN VESSELS TO WHICH CAPITAL CON3 STRUCTION FUNDS APPLY.—

4 (1) The second sentence of subsection (a) of

5 section 607 of the Merchant Marine Act, 1936 is

6 amended by striking ‘‘for operation in the United

7 States foreign, Great Lakes, or noncontiguous do8 mestic trade or in the fisheries of the United

9 States’’ and inserting ‘‘for operation in the fisheries

10 of the United States, or in the United States for11 eign, Great Lakes, noncontiguous domestic trade, or

12 other oceangoing domestic trade between two coastal

13 points in the United States or in support of oper14 ations conducted on the Outer Continental Shelf’’.

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

16 (defining eligible vessel) is amended to read as fol17 lows:

18 ‘‘(1) The term ‘eligible vessel’ means any

19 vessel—

20 ‘‘(A) documented under the laws of the

21 United States, and

22 ‘‘(B) operated in the foreign or domestic

23 commerce of the United States or in the fish24 eries of the United States.’’.

25 (3) Paragraph (2)(C) of section 607(k) of such

26 Act is amended to read as follows:
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1 ‘‘(C) which the person maintaining the

2 fund agrees with the Secretary of Commerce

3 will be operated in the fisheries of the United

4 States, or in the United States foreign, Great

5 Lakes, noncontiguous domestic trade, or other

6 oceangoing domestic trade between two coastal

7 points in the United States or in support of op8 erations conducted on the Outer Continental

9 Shelf.’’.

10 (4) Section 607(k) of such Act is amended by

11 striking paragraph (8) and redesignating paragraph

12 (9) as paragraph (8).

13 (5) The last sentence of paragraph (1) of sec14 tion 607(f) of such Act is amended by striking ‘‘and

15 containers’’ each place it appears.

16 (6) Paragraph (7) of section 607(k) of such Act

17 is amended by inserting ‘‘containers or trailers in18 tended for use as part of the complement of one or

19 more eligible vessels and’’ before ‘‘cargo handling’’.

20 (7) Subsection (k) of section 607 of such Act

21 (as amended by paragraph (4)) is amended by add22 ing at the end the following new paragraph:

23 ‘‘(9) The terms ‘foreign commerce’ and ‘foreign

24 trade’ have the meanings given such terms in section
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1 905, except that these terms shall include commerce

2 or trade between foreign ports.’’.

3 (b) TREATMENT OF CERTAIN LEASE PAYMENTS.—

4 (1) Paragraph (1) of section 607(f) of such Act

5 is amended by striking ‘‘or’’ at the end of subpara6 graph (B), by striking the period at the end of sub7 paragraph (C) and inserting ‘‘, or’’ and by inserting

8 after subparagraph (C) the following new subpara9 graph:

10 ‘‘(D) the payment of amounts which re11 duce the principal amount (as determined under

12 regulations promulgated by the Secretary) of a

13 qualified lease of a qualified vessel or container

14 which is part of the complement of an eligible

15 vessel.’’.

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

17 is amended by inserting ‘‘or to reduce the principal

18 amount of any qualified lease’’ after ‘‘indebtedness’’.

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

20 is amended by adding after paragraph (10) the fol21 lowing new paragraph:

22 ‘‘(11) The term ‘qualified lease’ means any

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

24 (c) AUTHORITY TO MAKE DEPOSITS UNDER THE

25 TARIFF ACT OF 1930.—
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1 (1) Paragraph (1) of section 607(b) of such Act

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

5 at the end the following new subparagraph:

6 ‘‘(E) the amount elected for deposit under

7 subsection (i) of section 466 of the Tariff Act

8 of 1930 (19 U.S.C 1466).’’.

9 (2) Subparagraph (A) of section 607(e)(2) of

10 such Act is amended to read as follows:

11 ‘‘(A) amounts referred to in subsections

12 (b)(1)(B) and (E),’’.

13 (d) AUTHORITY TO MAKE DEPOSITS FOR PRIOR

14 YEARS BASED ON AUDIT ADJUSTMENTS.—Subsection (b)

15 of section 607 of such Act is amended by adding at the

16 end thereof the following new paragraph:

17 ‘‘(4) To the extent permitted by joint regula18 tions, deposits may be made in excess of the limita19 tion described in paragraph (1) (and any limitation

20 specified in the agreement) for the taxable year if,

21 by reason of a change in taxable income for a prior

22 taxable year that has become final pursuant to a

23 closing agreement or other similar agreement en24 tered into during the taxable year, the amount of the
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1 deposit could have been made for such prior taxable

2 year.’’.

3 (e) TREATMENT OF CAPITAL GAINS AND LOSSES.—

4 (1) Paragraph (3) of section 607(e) of such Act

5 is amended to read as follows:

6 ‘‘(3) The capital gain account shall consist of—

7 ‘‘(A) amounts representing long-term cap8 ital gains (as defined in section 1222 of such

9 Code) on assets held in the fund, reduced by

10 ‘‘(B) amounts representing long-term cap11 ital losses (as defined in such section) on assets

12 held in the fund.’’.

13 (2) Subparagraph (B) of section 607(e)(4) of

14 such Act is amended to read as follows:

15 ‘‘(B)(i) amounts representing short-term

16 capital gains (as defined in section 1222 of

17 such Code) on assets held in the fund, reduced

18 by

19 ‘‘(ii) amounts representing short-term cap20 ital losses (as defined in such section) on assets

21 held in the fund,’’.

22 (3) Subparagraph (B) of section 607(h)(3) of

23 such Act is amended by striking ‘‘gain’’ and all that

24 follows and inserting ‘‘long-term capital gain (as de25 fined in section 1222 of such Code), and’’.
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1 (4) The last sentence of subparagraph (A) of

2 section 607(h)(6) of such Act is amended by striking

3 ‘‘20 percent (34 percent in the case of a corpora4 tion)’’ and inserting ‘‘the rate applicable to net cap5 ital gain under section 1(h)(1)(C) or 1201(a) of

6 such Code, as the case may be’’.

7 (f) COMPUTATION OF INTEREST WITH RESPECT TO

8 NONQUALIFIED WITHDRAWAL.—

9 (1) Subparagraph (C) of section 607(h)(3) of

10 such Act is amended—

11 (A) by striking clause (i) and inserting the

12 following new clause:

13 ‘‘(i) no addition to the tax shall be

14 payable under section 6651 of such Code,

15 and’’, and

16 (B) by striking ‘‘paid at the applicable rate

17 (as defined in paragraph (4))’’ in clause (ii) and

18 inserting ‘‘paid in accordance with section 6601

19 of such Code’’.

20 (2) Subsection (h) of section 607 of such Act

21 is amended by striking paragraph (4) and by redes22 ignating paragraphs (5) and (6) as paragraphs (4)

23 and (5), respectively.

24 (3) Subparagraph (A) of section 607(h)(5) of

25 such Act, as redesignated by paragraph (2), is
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1 amended by striking ‘‘paragraph (5)’’ and inserting

2 ‘‘paragraph (4)’’.

3 (g) OTHER CHANGES.—

4 (1) Section 607 of such Act is amended by

5 striking ‘‘the Internal Revenue Code of 1954’’ each

6 place it appears and inserting ‘‘the Internal Revenue

7 Code of 1986’’.

8 (2) Subsection (c) of section 607 of such Act is

9 amended by striking ‘‘interest-bearing securities ap10 proved by the Secretary’’ and inserting ‘‘interest11 bearing securities and other income-producing assets

12 (including accounts receivable) approved by the Sec13 retary’’.

14 SEC. 3. AMENDMENTS OF INTERNAL REVENUE CODE OF

15 1986.

16 (a) TREATMENT OF CERTAIN LEASE PAYMENTS.—

17 (1) Paragraph (1) of section 7518(e) of the In18 ternal Revenue Code of 1986 is amended by striking

19 ‘‘or’’ at the end of subparagraph (B), by striking the

20 period at the end of subparagraph (C) and inserting

21 ‘‘, or’’, and by inserting after subparagraph (C) the

22 following new subparagraph:

23 ‘‘(D) the payments of amounts which re24 duce the principal amount (as determined under

25 regulations) of a qualified lease of a qualified
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1 vessel or container which is part of the com2 plement of an eligible vessel.’’.

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

4 Code is amended by inserting ‘‘or to reduce the prin5 cipal amount of any qualified lease’’ after ‘‘indebted6 ness’’.

7 (b) AUTHORITY TO MAKE DEPOSITS UNDER THE

8 TARIFF ACT OF 1930.—

9 (1) Paragraph (1) of section 7518(a) of such

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

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

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

13 adding at the end the following new subparagraph:

14 ‘‘(E) the amount elected for deposit under

15 subsection (i) of section 466 of the Tariff Act

16 of 1930 (19 U.S.C 1466).’’.

17 (2) Subparagraph (A) of section 7518(d)(2) of

18 such Code is amended to read as follows:

19 ‘‘(A) amounts referred to in subsections

20 (a)(1)(B) and (E).’’.

21 (c) AUTHORITY TO MAKE DEPOSITS FOR PRIOR

22 YEARS BASED ON AUDIT ADJUSTMENTS.—Subsection (a)

23 of section 7518 of such Code is amended by adding at

24 the end thereof the following new paragraph:
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1 ‘‘(4) To the extent permitted by joint regula2 tions, deposits may be made in excess of the limita3 tion described in paragraph (1) (and any limitation

4 specified in the agreement) for the taxable year if,

5 by reason of a change in taxable income for a prior

6 taxable year that has become final pursuant to a

7 closing agreement or other similar agreement en8 tered into during the taxable year, the amount of the

9 deposit could have been made for such prior taxable

10 year.’’.

11 (d) TREATMENT OF CAPITAL GAINS AND LOSSES.—

12 (1) Paragraph (3) of section 7518(d) of such

13 Code is amended to read as follows:

14 ‘‘(3) CAPITAL GAIN ACCOUNT.—The capital

15 gain account shall consist of—

16 ‘‘(A) amounts representing long-term cap17 ital gains (as defined in section 1222) on assets

18 held in the fund, reduced by

19 ‘‘(B) amounts representing long-term cap20 ital losses (as defined in such section) on assets

21 held in the fund.

22 (2) Subparagraph (B) of section 7518(d)(4) of

23 such Code is amended to read as follows:
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1 ‘‘(B)(i) amounts representing short-term

2 capital gains (as defined in section 1222) on as3 sets held in the fund, reduced by

4 ‘‘(ii) amounts representing short-term cap5 ital losses (as defined in such section) on assets

6 held in the fund,’’.

7 (3) Subparagraph (B) of section 7518(g)(3) of

8 such Code is amended by striking ‘‘gain’’ and all

9 that follows and inserting ‘‘long-term capital gain

10 (as defined in section 1222), and’’.

11 (4) The last sentence of subparagraph (A) of

12 section 7518(g)(6) of such Code is amended by

13 striking ‘‘20 percent (34 percent in the case of a

14 corporation)’’ and inserting ‘‘the rate applicable to

15 net capital gain under such section 1(h)(1)(C) or

16 1201(a), as the case may be’’.

17 (e) COMPUTATION OF INTEREST WITH RESPECT TO

18 NONQUALIFIED WITHDRAWALS.—

19 (1) Subparagraph (C) of section 7518(g)(3) of

20 such Code is amended—

21 (A) by striking clause (i) and inserting the

22 following new clause:

23 ‘‘(i) no addition to the tax shall be

24 payable under section 6651, and’’, and
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1 (B) by striking ‘‘paid at the applicable rate

2 (as defined in paragraph (4))’’ in clause (ii) and

3 inserting ‘‘paid in accordance with section

4 6601’’.

5 (2) Subsection (g) of section 7518 of such Code

6 is amended by striking paragraph (4) and by redes7 ignating paragraphs (5) and (6) as paragraphs (4)

8 and (5), respectively.

9 (3) Subparagraph (A) of section 7518(g)(5) of

10 such Code, as redesignated by paragraph (2), is

11 amended by striking ‘‘paragraph (5)’’ and inserting

12 ‘‘paragraph (4)’’.

13 (f) OTHER CHANGES.—

14 (1) Paragraph (2) of section 7518(b) of such

15 Code is amended by striking ‘‘interest-bearing secu16 rities approved by the Secretary’’ and inserting ‘‘in17 terest-bearing securities and other income-producing

18 assets (including accounts receivable) approved by

19 the Secretary’’.

20 (2) Paragraph (1) of section 7518(e) of such

21 Code is amended by striking ‘‘and containers’’ each

22 place it appears.

23 (3) Subsection (i) of section 7518 of such Code

24 is amended by striking ‘‘this section’’ and inserting
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1 ‘‘the United States-Flag Merchant Marine Revital2 ization Act of 1999’’.

3 (4) 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

6 capital construction fund under section 607 of

7 the Merchant Marine Act, 1936 (46 App.

8 U.S.C. 1177), or in a construction reserve fund

9 under section 511 of such Act (46 App. U.S.C.

10 1161),’’.

11 (5) Subsection (c) of section 56 of such Code

12 is amended by striking paragraph (2) and by redes13 ignating paragraph (3) as paragraph (2).

14 SEC. 4. AMENDMENT TO THE TARIFF ACT OF 1930.

15 Section 466 of the Tariff Act of 1930 (19 U.S.C.

16 1466) is amended by adding at the end the following new

17 subsection:

18 ‘‘(i) ELECTION TO DEPOSIT DUTY INTO A CAPITAL

19 CONSTRUCTION FUND IN LIEU OF PAYMENT TO THE

20 SECRETARY OF THE TREASURY.—At the election of the

21 owner or master of any vessel referred to in subsection

22 (a) of this section which is an eligible vessel (as defined

23 in section 607(k) of the Merchant Marine Act, 1936), the

24 portion of any duty imposed by subsection (a) which is

25 deposited in a fund established under section 607 of such
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1 Act shall be treated as paid to the Secretary of the Treas2 ury in satisfaction of the liability for such duty.’’.

3 SEC. 5. EFFECTIVE DATE.

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

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

6 to taxable years beginning after the date of the enactment

7 of this Act.

8 (b) CHANGES IN COMPUTATION OF INTEREST.—The

9 amendments made by sections 2(f) and 3(e) shall apply

10 to withdrawals made after December 31, 1998, including

11 for purposes of computing interest on such a withdrawal

12 for periods on or before such date.

13 (c) QUALIFIED LEASES.—The amendments made by

14 sections 2(b) and 3(a) shall apply to leases in effect on,

15 or entered into after, December 31, 1998.

16 (d) AMENDMENT TO THE TARIFF ACT OF 1930.—

17 The amendment made by section 4 shall apply with re18 spect to entries not yet liquidated by December 31, 1998,

19 and to entries made on or after such date.

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