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. ABER-
CROMBIE) introduced the following bill; which was referred to the Com-
mittee on Ways and Means, and in addition to the Committees on Trans-
portation and Infrastructure, and Armed Services, for a period to be sub-
sequently 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 ma-
rine.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘United States-Flag
Merchant Marine Revitalization Act of 1999’’.
SEC. 2. AMENDMENTS OF MERCHANT MARINE ACT, 1936.
(a) CHANGES IN VESSELS TO WHICH CAPITAL CON-
STRUCTION FUNDS APPLY.—
(1) The second sentence of subsection (a) of
section 607 of the Merchant Marine Act, 1936 is
amended by striking ‘‘for operation in the United
States foreign, Great Lakes, or noncontiguous do-
mestic trade or in the fisheries of the United
States’’ and inserting ‘‘for operation in the fisheries
of the United States, or in the United States for-
eign, Great Lakes, noncontiguous domestic trade, or
other oceangoing domestic trade between two coastal
points in the United States or in support of oper-
ations conducted on the Outer Continental Shelf’’.
(2) Paragraph (1) of section 607(k) of such Act
(defining eligible vessel) is amended to read as fol-
lows:
‘‘(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 fish-
eries of the United States.’’.
(3) Paragraph (2)(C) of section 607(k) of such
Act is amended to read as follows:
‘‘(C) which the person maintaining the
fund agrees with the Secretary of Commerce
will be operated in the fisheries of the United
States, or in the United States foreign, Great
Lakes, noncontiguous domestic trade, or other
oceangoing domestic trade between two coastal
points in the United States or in support of op-
erations conducted on the Outer Continental
Shelf.’’.
(4) Section 607(k) of such Act is amended by
striking paragraph (8) and redesignating paragraph
(9) as paragraph (8).
(5) The last sentence of paragraph (1) of sec-
tion 607(f) of such Act is amended by striking ‘‘and
containers’’ each place it appears.
(6) Paragraph (7) of section 607(k) of such Act
is amended by inserting ‘‘containers or trailers in-
tended for use as part of the complement of one or
more eligible vessels and’’ before ‘‘cargo handling’’.
(7) Subsection (k) of section 607 of such Act
(as amended by paragraph (4)) is amended by add-
ing at the end the following new paragraph:
‘‘(9) The terms ‘foreign commerce’ and ‘foreign
trade’ have the meanings given such terms in section
(1) Paragraph (1) of section 607(b) of such Act
is amended by striking ‘‘and’’ at the end of subpara-
graph (C), by striking the period at the end of sub-
paragraph (D) and inserting ‘‘, and’’, and by adding
at the end the following new subparagraph:
‘‘(E) the amount elected for deposit under
subsection (i) of section 466 of the Tariff Act
of 1930 (19 U.S.C 1466).’’.
(2) Subparagraph (A) of section 607(e)(2) of
such Act is amended to read as follows:
‘‘(A) amounts referred to in subsections
(b)(1)(B) and (E),’’.
(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 regula-
tions, deposits may be made in excess of the limita-
tion described in paragraph (1) (and any limitation
specified in the agreement) for the taxable year if,
by reason of a change in taxable income for a prior
taxable year that has become final pursuant to a
closing agreement or other similar agreement en-
tered into 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 cap-
ital gains (as defined in section 1222 of such
Code) on assets held in the fund, reduced by
‘‘(B) amounts representing long-term cap-
ital 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 held in the fund, reduced
by
‘‘(ii) amounts representing short-term cap-
ital losses (as defined in such section) on assets
held in the fund,’’.
(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 de-
fined 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
‘‘20 percent (34 percent in the case of a corpora-
tion)’’ and inserting ‘‘the rate applicable to net cap-
ital gain under section 1(h)(1)(C) or 1201(a) of
such Code, as the case may be’’.
(f) COMPUTATION OF INTEREST WITH RESPECT TO
NONQUALIFIED WITHDRAWAL.—
(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 redes-
ignating 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 ap-
proved by the Secretary’’ and inserting ‘‘interest-
bearing securities and other income-producing assets
(including accounts receivable) approved by the Sec-
retary’’.
SEC. 3. AMENDMENTS OF INTERNAL REVENUE CODE OF
1986.
(a) TREATMENT OF CERTAIN LEASE PAYMENTS.—
(1) Paragraph (1) of section 7518(e) of the In-
ternal Revenue Code of 1986 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 payments of amounts which re-
duce the principal amount (as determined under
regulations) of a qualified lease of a qualified
vessel or container which is part of the com-
plement of an eligible vessel.’’.
(2) Paragraph (4) of section 7518(f) of such
Code is amended by inserting ‘‘or to reduce the prin-
cipal amount of any qualified lease’’ after ‘‘indebted-
ness’’.
(b) AUTHORITY TO MAKE DEPOSITS UNDER THE
TARIFF ACT OF 1930.—
(1) Paragraph (1) of section 7518(a) 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 the following new subparagraph:
‘‘(E) the amount elected for deposit under
subsection (i) of section 466 of the Tariff Act
of 1930 (19 U.S.C 1466).’’.
(2) Subparagraph (A) of section 7518(d)(2) of
such Code is amended to read as follows:
‘‘(A) amounts referred to in subsections
(a)(1)(B) and (E).’’.
(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:
‘‘(B)(i) amounts representing short-term
capital gains (as defined in section 1222) on as-
sets held in the fund, reduced by
‘‘(ii) amounts representing short-term cap-
ital losses (as defined in such section) on assets
held in the fund,’’.
(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 ‘‘20 percent (34 percent in the case of a
corporation)’’ and inserting ‘‘the rate applicable to
net capital gain under such section 1(h)(1)(C) 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 redes-
ignating 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 secu-
rities approved by the Secretary’’ and inserting ‘‘in-
terest-bearing securities and other income-producing
assets (including accounts receivable) approved by
the Secretary’’.
(2) Paragraph (1) of section 7518(e) of such
Code is amended by striking ‘‘and containers’’ each
place it appears.
(3) Subsection (i) of section 7518 of such Code
is amended by striking ‘‘this section’’ and inserting
‘‘the United States-Flag Merchant Marine Revital-
ization Act of 1999’’.
(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 of such Code
is amended by striking paragraph (2) and by redes-
ignating paragraph (3) as paragraph (2).
SEC. 4. AMENDMENT TO THE TARIFF ACT OF 1930.
Section 466 of the Tariff Act of 1930 (19 U.S.C.
1466) is amended by adding at the end the following new
subsection:
‘‘(i) ELECTION TO DEPOSIT DUTY INTO A CAPITAL
CONSTRUCTION FUND IN LIEU OF PAYMENT TO THE
SECRETARY OF THE TREASURY.—At the election of the
owner or master of any vessel referred to in subsection
(a) of this section which is an eligible vessel (as defined
in section 607(k) of the Merchant Marine Act, 1936), the
portion of any duty imposed by subsection (a) which is
deposited in a fund established under section 607 of such
Act shall be treated as paid to the Secretary of the Treas-
ury in satisfaction of the liability for such duty.’’.
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) CHANGES IN COMPUTATION OF INTEREST.—The
amendments made by sections 2(f) and 3(e) shall apply
to withdrawals made after December 31, 1998, including
for purposes of computing interest on such a withdrawal
for periods on or before such date.
(c) QUALIFIED LEASES.—The amendments made by
sections 2(b) and 3(a) shall apply to leases in effect on,
or entered into after, December 31, 1998.
(d) AMENDMENT TO THE TARIFF ACT OF 1930.—
The amendment made by section 4 shall apply with re-
spect to entries not yet liquidated by December 31, 1998,
and to entries made on or after such date.
Æ