I
107TH CONGRESS
1ST SESSION
H. R. 3262
To revitalize the international competitiveness of the United States-flag
maritime industry through international tax parity, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 8, 2001
Mr. OBERSTAR (for himself and Mr. YOUNG of Alaska) introduced the fol-
lowing bill; which was referred to the Committee on Ways and Means,
and in addition to the Committee on Transportation and Infrastructure,
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 revitalize the international competitiveness of the United
States-flag maritime industry through international tax
parity, and for other purposes.
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 ‘‘Merchant Marine Cost
Parity Act of 2001’’.
TITLE I—INTERNATIONAL TAX
PARITY
SEC. 101. ELECTION TO DETERMINE TAXABLE INCOME
FROM CERTAIN INTERNATIONAL SHIPPING
ACTIVITIES USING PER TON RATE.
(a) IN GENERAL.—Chapter 1 of the Internal Rev-
enue Code of 1986 is amended by inserting after sub-
chapter Q the following new subchapter:
‘‘Subchapter R—Election To Determine Tax-
able Income From Certain International
Shipping Activities Using per Ton Rate
‘‘Sec. 1352. Alternative tax on qualifying shipping activities.
‘‘Sec. 1353. Taxable income from qualifying shipping activities.
‘‘Sec. 1354. Qualifying shipping tax election; revocation; termi-
nation.
‘‘Sec. 1355. Definitions and special rules.
‘‘Sec. 1356. Qualifying shipping activities.
‘‘Sec. 1357. Items not subject to regular tax; depreciation; inter-
est.
‘‘Sec. 1358. Allocation of credits, income, and deductions.
‘‘Sec. 1359. Disposition of qualifying shipping assets.
‘‘SEC. 1352. ALTERNATIVE TAX ON QUALIFYING SHIPPING
ACTIVITIES.
‘‘(a) IN GENERAL.—The taxable income of an elect-
ing corporation from qualifying shipping activities shall be
the amount determined under this subchapter, and the
corporate percentages of the items of income, gain, loss,
deduction, or credit of an electing corporation and of other
members of the electing group of such corporation which
would otherwise be taken into account by reason of its
qualifying shipping activities shall be taken into account
to the extent provided in section 1357.
‘‘(b) ALTERNATIVE TAX.—The taxable income of an
electing corporation from qualifying shipping activities, if
otherwise taxable under section 11, 882, or 887, shall be
subject to tax only under this section at the maximum rate
specified in section 11(b).
‘‘(c) TRANSFERS TO FEDERAL VESSEL FINANCING
FUND.—The Secretary of the Treasury shall transfer to
the Federal Vessel Financing Fund created under title XI
of the Merchant Marine Act, 1936, the taxes collected
under subsection (b).
‘‘SEC. 1353. TAXABLE INCOME FROM QUALIFYING SHIPPING
ACTIVITIES.
‘‘(a) IN GENERAL.—For purposes of this subchapter,
the taxable income of an electing corporation from quali-
fying shipping activities shall be its corporate income per-
centage of the sum of the amounts determined under sub-
section (b) for each qualifying vessel operated by such
electing corporation or other electing entity.
‘‘(b) AMOUNTS.—For purposes of subsection (a), the
amount of taxable income of an electing entity for each
qualifying vessel shall equal the product of—
‘‘(1) the daily notional taxable income from the
operation of the qualifying vessel in United States
foreign trade, and
‘‘(2) the number of days during the taxable
year that the electing entity operated such vessel as
a qualifying vessel in United States foreign trade.
‘‘(c) DAILY NOTIONAL TAXABLE INCOME.—For pur-
poses of subsection (b), the daily notional taxable income
from the operation of a qualifying vessel is 40 cents for
each 100 tons of the net tonnage of the vessel, up to
25,000 net tons, and 20 cents for each 100 tons of the
net tonnage of the vessel, in excess of 25,000 net tons.
‘‘(d) MULTIPLE OPERATORS OF VESSEL.—If 2 or
more persons have a joint interest in a qualifying vessel
and are considered as operators of that vessel, the taxable
income from the operation of such vessel for that time (as
determined under this section) shall be allocated among
such persons on the basis of their ownership and charter
interests in such vessel or on such other basis as the Sec-
retary may prescribe by regulations.
‘‘(e) 
NONCORPORATE
PERCENTAGE.—Notwith-
standing any contrary provision of this subchapter, the
noncorporate percentage of any item of income, gain, loss,
deduction, or credit of any member of an electing group
shall be taken into account for all purposes of this subtitle
as if this subchapter were not in effect.
‘‘SEC. 1354. QUALIFYING SHIPPING TAX ELECTION; REV-
OCATION; TERMINATION.
‘‘(a) IN GENERAL.—Except as provided in sub-
sections (b) and (f), a qualifying shipping tax election may
be made in respect of any qualifying entity.
‘‘(b) CONDITION OF ELECTION.—An election may be
made by a member of a controlled group under this sub-
section for any taxable year only if all qualifying entities
that are members of the controlled group join in the elec-
tion.
‘‘(c) WHEN MADE.—An election under subsection (a)
may be made by a qualifying entity in such form as pre-
scribed by the Secretary. Such election shall be filed with
the qualifying entity’s return for the first taxable year to
which the election shall apply, by the due date for such
return (including any applicable extensions).
‘‘(d) YEARS FOR WHICH EFFECTIVE.—An election
under subsection (a) shall be effective for the taxable year
of the qualifying entity for which it is made and for all
succeeding taxable years of the entity, until such election
is terminated under subsection (e).
‘‘(e) TERMINATION.—
‘‘(1) BY REVOCATION.—