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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2152 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 2152

  To amend the Merchant Marine Act, 1936 to encourage merchant marine 
                  investment, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                              May 19, 1993

    Mr. Studds (for himself, Mr. Lipinski, Mr. Fields of Texas, Mr. 
 Bateman, Mr. Young of Alaska, Mr. Hughes, Mr. Hutto, Mr. Tauzin, Mr. 
 Ortiz, Mr. Manton, Mr. Pickett, Mr. Hochbrueckner, Mr. Pallone, Mrs. 
Unsoeld, Mr. Lancaster, Mr. Andrews of Maine, Mr. Gene Green of Texas, 
Mr. Hastings, Mr. Hamburg, Mr. Stupak, Mr. Thompson of Mississippi, Mr. 
   Ackerman, and Mr. King) 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 to encourage merchant marine 
                  investment, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Merchant Marine Investment Act of 
1993''.

SEC. 2. AMENDMENTS OF MERCHANT MARINE ACT, 1936.

    (a) Changes in Vessels to Which Capital Construction Funds Apply.--
            (1) The second sentence of section 607(a) of the Merchant 
        Marine Act, 1936 (46 App. U.S.C. 1177) is amended to read as 
        follows: ``Any agreement entered into under this section shall 
        be for the purpose of providing replacement vessels, additional 
        vessels, or reconstructed vessels, built in the United States 
        and documented under the laws of the United States for 
        operation in the foreign or domestic commerce of the United 
        States or in the fisheries of the United States and shall 
        provide for the deposit in the fund of the amounts agreed upon 
        as necessary or appropriate to provide for qualified 
        withdrawals under subsection (f).''
            (2) Paragraph (1) of section 607(k) of such Act (defining 
        eligible vessel) is amended to read as follows:
            ``(1) The term `eligible vessel' means any vessel--
                    ``(A) documented under the laws of the United 
                States, and
                    ``(B) operated in the foreign or domestic commerce 
                of the United States or in the fisheries of the United 
                States.''
            (3) Paragraph (2) of section 607(k) of such Act is amended 
        by striking subparagraph (C) and inserting the following:
                    ``(C) which the person maintaining the fund agrees 
                with the Secretary will be operated in the foreign or 
                domestic commerce of the United States or in the 
                fisheries of the United States.
        Such term shall not include any towing vessel, barge, or dry or 
        liquid bulk vessel operated on the inland waterways of the 
        United States.''
            (4) Subsection (f) of section 607 of such Act is amended by 
        adding at the end thereof the following new paragraph:
            ``(3) For purposes of this subsection, the determination of 
        whether any withdrawal from amounts in any capital construction 
        fund as of the date of the enactment of the Merchant Marine 
        Investment Act of 1993 (or from earnings thereon) is a 
        qualified withdrawal shall be made using the definition of 
        `qualified vessel' as in effect on the day before such date of 
        the enactment.''
            (5) Subsection (k) of section 607 of such Act is amended by 
        adding at the end thereof the following new paragraphs:
            ``(10) The term `inland waterways of the United States' 
        means any inland waterway of the United States which is 
        described in section 206 of the Inland Waterways Revenue Act of 
        1978 (33 U.S.C. 1804).
            ``(11) The terms `foreign commerce' and `foreign trade' 
        have the meanings given such terms in section 905, except that 
        such terms shall include commerce or trade between foreign 
        ports.''
            (6) Paragraph (7) of section 607(k) of such Act is amended 
        by inserting ``containers or barges intended for use as part of 
        the complement of 1 or more qualified vessels and'' before 
        ``cargo handling''.
    (b) Treatment of Fund Earnings.--
            (1) Section 607 of such Act is amended by adding at the end 
        thereof the following new subsection:
    ``(n) Taxation of Earnings on Investments.--
            ``(1) In general.--The tax imposed by chapter 1 of the 
        Internal Revenue Code of 1986 shall be determined--
                    ``(A) by excluding from gross income the taxable 
                earnings from the investment and reinvestment of 
                amounts held in a capital construction fund, and
                    ``(B) by increasing the tax imposed by such chapter 
                by the product of the amount of such taxable earnings 
                and the highest rate of tax specified in section 1 
                (section 11 in the case of a corporation) of such Code.
            ``(2) Maximum rate on capital gains.--If there is a net 
        capital gain on amounts held in a capital construction fund, 
        the rate of tax taken into account under paragraph (1)(B) with 
        respect to such gain shall not exceed the rate applicable to 
        net capital gain under section 1(h) or 1201(a) of such Code, as 
        the case may be.
            ``(3) Coordination with deduction for net operating 
        losses.--Any earnings excluded from gross income under 
        paragraph (1) shall be excluded in determining taxable income 
        under section 172(b)(2) of such Code.
            ``(4) Taxable earnings.--For purposes of this section, the 
        term `taxable earnings' means net earnings determined with the 
        following modifications:
                    ``(A) There shall be excluded interest income 
                exempt from taxation under section 203 of such Code.
                    ``(B) If the person maintaining the fund is a 
                corporation, there shall be excluded the percentage 
                applicable under section 243(a)(1) of such Code of any 
                dividend received by the fund with respect to which 
                such person would (but for paragraph (1)(A)) be allowed 
                a deduction under section 243 of such Code.
                    ``(C) Losses from the sale or exchange of capital 
                assets shall be allowed only to the extent of gains 
                from such sales or exchanges.
                    ``(D) There shall be excluded--
                            ``(i) earnings on amounts deposited in the 
                        fund which are attributable to vessels 
                        documented under the laws of the United States 
                        for operation in the fisheries of the United 
                        States, and
                            ``(ii) earnings on earnings described in 
                        clause (i).''
            (2) Subparagraph (D) of section 607(b)(1) of such Act is 
        amended by inserting ``reduced by the tax imposed on such 
        receipts under subsection (n)'' after ``in such fund''.
            (3) Subparagraph (C) of section 607(d)(1) of such Act is 
        amended by striking ``shall not be taken into account'' and 
        inserting ``shall be taken into account as provided in 
        subsection (n)''.
            (4) Paragraph (2) of section 607(e) of such Act is amended 
        by striking ``and'' at the end of subparagraph (C), by striking 
        the period at the end of subparagraph (D) and inserting ``, 
        and'', and by adding at the end thereof the following new 
        subparagraph:
                    ``(F) the taxable earnings (as defined in 
                subsection (n)) of the fund for any taxable year 
                beginning after the date of the enactment of the 
                Merchant Marine Investment Act of 1993.''
            (5) Paragraph (3) of section 607(e) of such Act is amended 
        by adding at the end thereof the following new sentence:
        ``Any amount included in the taxable earnings (as defined in 
        subsection (n)) of the fund for any taxable year beginning 
        after the date of the enactment of the Merchant Marine 
        Investment Act of 1993 shall not be taken into account under 
        this paragraph.''
            (6) Paragraph (4) of section 607(e) of such Act is amended 
        by adding at the end thereof the following new sentence:
        ``In the case of taxable years beginning after the date of the 
        enactment of the Merchant Marine Investment Act of 1993, any 
        amount included in the taxable earnings (as defined in 
        subsection (n)) of the fund shall not be taken into account 
        under subparagraph (B), and subparagraphs (C) and (E) shall not 
        apply.''
            (7) Paragraph (1) of section 607(f) of such Act is amended 
        by striking ``or'' at the end of subparagraph (B), by striking 
        the period at the end of subparagraph (C) and inserting ``, 
        or'', and by inserting after subparagraph (C) the following new 
        subparagraph:
                    ``(D) the payment of the tax imposed by subsection 
                (n).''
    (c) Treatment of Certain Lease Payments.--
            (1) Paragraph (1) of section 607(f) of such Act is amended 
        by striking ``or'' at the end of subparagraph (C), by striking 
        the period at the end of subparagraph (D) and inserting ``, 
        or'', and by inserting after subparagraph (D) the following new 
        subparagraph:
                    ``(E) the payment of amounts which reduce the 
                principal amount (as determined under regulations) of a 
                qualified lease of a qualified vessel or of a barge or 
                container which is part of the complement of a 
                qualified vessel.''
            (2) Paragraph (4) of section 607(g) of such Act is amended 
        by inserting ``(or to reduce the principal amount of any 
        qualified lease)'' after ``indebtedness''.
            (3) Subsection (k) of section 607 of such Act is amended by 
        adding at the end thereof the following new paragraph:
            ``(12) The term `qualified lease' means any lease with a 
        term of at least 5 years.''
    (d) Authority To Make Deposits for Prior Years Based on Audit 
Adjustments.--Subsection (b) of section 607 of such Act is amended by 
adding at the end thereof the following new paragraph:
            ``(4) To the extent permitted by joint regulations, 
        deposits may be made in excess of the limitation described in 
        paragraph (1) (and any limitation specified in the agreement) 
        for the taxable year if, by reason of an audit adjustment to a 
        prior taxable year which became final during the taxable year, 
        the amount of the deposit could have been made for such prior 
        taxable year.''
    (e) Treatment of Capital Gains and Losses.--
            (1) Paragraph (3) of section 607(e) of such Act is amended 
        to read as follows:
            ``(3) The capital gain account shall consist of--
                    ``(A) amounts representing long-term capital gains 
                (as defined in section 1222 of such Code) on assets 
                referred to in subsection (b)(1)(C), reduced by
                    ``(B) amounts representing long-term capital losses 
                (as defined in such section) on assets held in the 
                fund.''
            (2) Subparagraph (B) of section 607(e)(4) of such Act is 
        amended to read as follows:
                    ``(B)(i) amounts representing short-term capital 
                gains (as defined in section 1222 of such Code) on 
                assets referred to in subsection (b)(1)(C), reduced by
                    ``(ii) amounts representing short-term capital 
                losses (as defined in such section) on assets held in 
                the fund, and''.
            (3) Subparagraph (B) of section 607(h)(3) of such Act is 
        amended by striking ``gain'' and all that follows and inserting 
        ``long-term capital gain (as defined in section 1222 of such 
        Code), and''.
            (4) The last sentence of subparagraph (A) of section 
        607(h)(6) of such Act is amended by striking ``28 percent (34 
        percent in the case of a corporation)'' and inserting ``the 
        rate applicable to net capital gain under such section 1(h) or 
        1201(a), as the case may be''.
    (f) Computation of Interest With Respect to Nonqualified 
Withdrawals.--
            (1) Subparagraph (C) of section 607(h)(3) of such Act is 
        amended--
                    (A) by striking clause (i) and inserting the 
                following new clause:
                            ``(i) no addition to the tax shall be 
                        payable under section 6651 of such Code, and'', 
                        and
                    (B) by striking ``paid at the applicable rate (as 
                defined in paragraph (4))'' in clause (ii) and 
                inserting ``paid in accordance with section 6601 of 
                such Code''.
            (2) Subsection (h) of section 607 of such Act is amended by 
        striking paragraph (4) and by redesignating paragraphs (5) and 
        (6) as paragraphs (4) and (5), respectively.
            (3) Subparagraph (A) of section 607(h)(5) of such Act, as 
        redesignated by paragraph (2), is amended by striking 
        ``paragraph (5)'' and inserting ``paragraph (4)''.
    (g) Other Changes.--
            (1) Section 607 of such Act is amended by striking ``the 
        Internal Revenue Code of 1954'' each place it appears and 
        inserting ``the Internal Revenue Code of 1986''.
            (2) Subsection (c) of section 607 of such Act is amended by 
        striking ``interest-bearing securities approved by the 
        Secretary'' and inserting ``interest-bearing securities and 
        other income-producing assets (including accounts receivable) 
        approved by the Secretary''.

SEC. 3. AMENDMENTS OF INTERNAL REVENUE CODE OF 1986.

    (a) Treatment of Fund Earnings.--
            (1) Section 7518 of the Internal Revenue Code of 1986 is 
        amended by redesignating subsections (h) and (i) as subsections 
        (i) and (j), respectively, and by inserting after subsection 
        (g) the following new subsection:
    ``(h) Taxation of Earnings on Investments.--
            ``(1) In general.--The tax imposed by chapter 1 shall be 
        determined--
                    ``(A) by excluding from gross income the earnings 
                from the investment and reinvestment of amounts held in 
                a capital construction fund, and
                    ``(B) by increasing the tax imposed by such chapter 
                by the product of the amount of such earnings and the 
                highest rate of tax specified in section 1 (section 11 
                in the case of a corporation).
            ``(2) Maximum rate on capital gains.--If there is a net 
        capital gain on amounts held in a capital construction fund, 
        the rate of tax taken into account under paragraph (1)(B) with 
        respect to such gain shall not exceed the rate applicable to 
        net capital gain under section 1(h) or 1201(a), as the case may 
        be.
            ``(3) Coordination with deduction for net operating 
        losses.--Any earnings excluded from gross income under 
        paragraph (1) shall be excluded in determining taxable income 
        under section 172(b)(2).
            ``(4) Taxable earnings.--For purposes of this section, the 
        term `taxable earnings' means net earnings determined with the 
        following modifications:
                    ``(A) There shall be excluded interest income 
                exempt from taxation under section 203.
                    ``(B) If the person maintaining the fund is a 
                corporation, there shall be excluded the percentage 
                applicable under section 243(a)(1) of any dividend 
                received by the fund with respect to which such person 
                would (but for paragraph (1)(A)) be allowed a deduction 
                under section 243.
                    ``(C) Losses from the sale or exchange of capital 
                assets shall be allowed only to the extent of gains 
                from such sales or exchanges.
                    ``(D) There shall be excluded--
                            ``(i) earnings on amounts deposited in the 
                        fund which are attributable to vessels 
                        documented under the laws of the United States 
                        for operation in the fisheries of the United 
                        States, and
                            ``(ii) earnings on earnings described in 
                        clause (i).''
            (2) Subparagraph (D) of section 7518(a)(1) of such Code is 
        amended by inserting ``reduced by the tax imposed on such 
        receipts under subsection (h)'' after ``in such fund''.
            (3) Subparagraph (C) of section 7518(c)(1) of such Code is 
        amended by striking ``shall not be taken into account'' and 
        inserting ``shall be taken into account as provided in 
        subsection (h)''.
            (4) Paragraph (2) of section 7518(d) of such Code is 
        amended by striking ``and'' at the end of subparagraph (C), by 
        striking the period at the end of subparagraph (D) and 
        inserting ``, and'', and by adding at the end thereof the 
        following new subparagraph:
                    ``(F) the taxable earnings (as defined in 
                subsection (h)) of the fund for any taxable year 
                beginning after the date of the enactment of the 
                Merchant Marine Investment Act of 1993.''
            (5) Paragraph (3) of section 7518(d) of such Code is 
        amended by adding at the end thereof the following new 
        sentence: ``Any amount included in the taxable earnings (as 
        defined in subsection (h)) of the fund for any taxable year 
        beginning after the date of the enactment of the Merchant 
        Marine Investment Act of 1993 shall not be taken into account 
        under this paragraph.''
            (6) Paragraph (4) of section 7518(d) of such Code is 
        amended by adding at the end thereof the following new 
        sentence: ``In the case of taxable years beginning after the 
        date of the enactment of the Merchant Marine Investment Act of 
        1993, any amount included in the taxable earnings (as defined 
        in subsection (h)) of the fund shall not be taken into account 
        under subparagraph (B), and subparagraphs (C) and (E) shall not 
        apply.''
            (7) Paragraph (1) of section 7518(g) of such Code is 
        amended by striking ``subsection (h)'' and inserting 
        ``subsection (i)''.
            (8) Paragraph (1) of section 7518(e) of such Code is 
        amended by striking ``or'' at the end of subparagraph (B), by 
        striking the period at the end of subparagraph (C) and 
        inserting ``, or'', and by inserting after subparagraph (C) the 
        following new subparagraph:
                    ``(D) the tax imposed by subsection (h).''
    (b) Treatment of Certain Lease Payments.--
            (1) Paragraph (1) of section 7518(e) of such Code is 
        amended by striking ``or'' at the end of subparagraph (C), by 
        striking the period at the end of subparagraph (D) and 
        inserting ``, or'', and by inserting after subparagraph (D) the 
        following new subparagraph:
                    ``(E) the payment of amounts which reduce the 
                principal amount (as determined under regulations) of a 
                qualified lease of a qualified vessel or of a barge or 
                container which is part of the complement of a 
                qualified vessel.
            (2) Paragraph (4) of section 7518(f) of such Code is 
        amended by inserting ``(or to reduce the principal amount of 
        any qualified lease)'' after ``indebtedness''.
    (c) Authority To Make Deposits for Prior Years Based On Audit 
Adjustments.--Subsection (a) of section 7518 of such Code is amended by 
adding at the end thereof the following new paragraph:
            ``(4) To the extent permitted by joint regulations, 
        deposits may be made in excess of the limitation described in 
        paragraph (1) (and any limitation specified in the agreement) 
        for the taxable year if, by reason of an audit adjustment to a 
        prior taxable year which became final during the taxable year, 
        the amount of the deposit could have been made for such prior 
        taxable year.''
    (d) Treatment of Capital Gains and Losses.--
            (1) Paragraph (3) of section 7518(d) of such Code is 
        amended to read as follows:
            ``(3) The capital gain account shall consist of--
                    ``(A) amounts representing long-term capital gains 
                (as defined in section 1222) on assets referred to in 
                subsection (b)(1)(C), reduced by
                    ``(B) amounts representing long-term capital losses 
                (as defined in such section) on assets held in the 
                fund.''
            (2) Subparagraph (B) of section 7518(d)(4) of such Code is 
        amended to read as follows:
                    ``(B)(i) amounts representing short-term capital 
                gains (as defined in section 1222) on assets referred 
                to in subsection (a)(1)(C), reduced by
                    ``(ii) amounts representing short-term capital 
                losses (as defined in such section) on assets held in 
                the fund, and''.
            (3) Subparagraph (B) of section 7518(g)(3) of such Code is 
        amended by striking ``gain'' and all that follows and inserting 
        ``long-term capital gain (as defined in section 1222), and''.
            (4) The last sentence of subparagraph (A) of section 
        7518(g)(6) of such Code is amended by striking ``28 percent (34 
        percent in the case of a corporation)'' and inserting ``the 
        rate applicable to net capital gain under such section 1(h) or 
        1201(a), as the case may be''.
    (e) Computation of Interest With Respect to Nonqualified 
Withdrawals.--
            (1) Subparagraph (C) of section 7518(g)(3) of such Code is 
        amended--
                    (A) by striking clause (i) and inserting the 
                following new clause:
                            ``(i) no addition to the tax shall be 
                        payable under section 6651, and'', and
                    (B) by striking ``paid at the applicable rate (as 
                defined in paragraph (4))'' in clause (ii) and 
                inserting ``paid in accordance with section 6601''.
            (2) Subsection (g) of section 7518 of such Code is amended 
        by striking paragraph (4) and by redesignating paragraphs (5) 
        and (6) as paragraphs (4) and (5), respectively.
            (3) Subparagraph (A) of section 7518(g)(5) of such Code, as 
        redesignated by paragraph (2), is amended by striking 
        ``paragraph (5)'' and inserting ``paragraph (4)''.
    (f) Other Changes.--
            (1) Paragraph (2) of section 7518(b) of such Code is 
        amended by striking ``interest-bearing securities approved by 
        the Secretary'' and inserting ``interest-bearing securities and 
        other income-producing assets (including accounts receivable) 
        approved by the Secretary''.
            (2) Subsection (j) of section 7518 of such Code is amended 
        by striking ``this section.'' and inserting ``the Omnibus 
        Budget Reconciliation Act of 1993.''
            (3) Section 137 of such Code is amended by striking 
        paragraph (4) and by redesignating paragraphs (5) and (6) as 
        paragraphs (4) and (5), respectively.
            (4) Subparagraph (B) of section 543(a)(1) of such Code is 
        amended to read as follows:
            ``(B) interest on amounts set aside in a capital 
        construction fund under section 607 of the Merchant Marine Act, 
        1936 (46 App. U.S.C. 1177), or in a construction reserve fund 
        under section 511 of such Act (46 App. U.S.C. 1161),''.
            (5) Subsection (c) of section 56 is amended by striking 
        paragraph (2) and by redesignating paragraph (3) as paragraph 
        (2).

SEC. 4. 3-YEAR RECOVERY PERIOD FOR UNITED STATES FLAG VESSELS.

    (a) In General.--Subparagraph (A) of section 168(e)(3) of the 
Internal Revenue Code of 1986 is amended by striking ``and'' at the end 
of clause (i), by striking the period at the end of clause (ii) and 
inserting ``, and'', and by adding at the end thereof the following:
                            ``(iii) any eligible vessel (as defined in 
                        section 607(k)(1) of the Merchant Marine Act, 
                        1936, and its complement of containers, but 
                        only if the original use of such vessel and 
                        containers commences with the taxpayer.
                Clause (iii) shall not apply to any vessel documented 
                under the laws of the United States for operation in 
                the fisheries of the United States.''
    (b) Minimum Tax Treatment.--
            (1) Subparagraph (B) of section 56(a)(1) of such Code is 
        amended by inserting before the period ``or in paragraph 
        (3)(A)(iii) of section 168(e)''.
            (2) Clause (v) of section 56(g)(4)(A) of such Code is 
        amended by inserting ``or in paragraph (3)(A)(iii) of section 
        168(e)'' after ``section 168(f)''.

SEC. 5. EFFECTIVE DATE.

    (a) In General.--Except as otherwise provided in this section, the 
amendments made by this Act shall apply to taxable years beginning 
after the date of the enactment of this Act.
    (b) Definition of Qualified Vessel.--The amendments made by 
paragraphs (2) and (3) of section 2(a) shall apply for purposes of 
determining whether any withdrawal made after December 31, 1992, is a 
qualified withdrawal (within the meaning of section 607(f) of the 
Merchant Marine Act, 1936, as in effect after such amendments).
    (c) Taxation of Earnings.--The amendments made by sections 2(b) and 
3(a) shall apply to earnings after December 31, 1992, in taxable years 
ending after such date.
    (d) Changes in Computation of Interest.--The amendments made by 
sections 2(f) and 3(e) shall apply to withdrawals made after December 
31, 1992, including for purposes of computing interest on such a 
withdrawal for periods on or before such date.
    (e) Qualified Leases.--The amendments made by sections 2(c) and 
3(b) shall apply to leases in effect on, or entered into after, 
December 31, 1992.
    (f) Depreciation.--The amendments made by section 4 shall apply to 
property placed in service after December 31, 1992, in taxable years 
ending after such date.

                                 <all>

HR 2152 IH----2
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