Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 3622 AUGUST 2016 • FOGHORN LEGISLATIVEREPORT 1970 (1970 Act) authorized a Capital Construction Fund (CCF) tax deferral program that allows a ship owner or operator, or a shipyard, to defer payment of federal (and in most instances state) income taxes on the profits from vessel operations and sales, and vessel leasing, and on as- sociated investment income. The CCF Program provides what is in effect an interest-free loan of the money that a taxpayer would otherwise pay to settle current taxes in exchange for the tax- payer’s promise to eventually use that money for the construction of vessels for operation in to U.S. foreign, U.S. non-contiguous, Great Lakes, U.S. offshore, and (since 2007) U.S. “short sea” services (a term that includes ve- hicle-carrying ferries). MARAD opened the program for shipyard use in 1988 with the award of a CCF program contract to National Steel & Shipbuilding Company (NASSCO). The NASSCO shipyard remains a program participant today, with a significant CCF program working capital fund that it employs in transactions with its customers that operate vessels in the Jones Act non- contiguous trades. The CCF Program allows a shipyard participant to defer tax on its earnings by depositing these earnings with an approved financial institu- tion depository under the terms of the Participant’s CCF Program Agreement The participant commits to a program of vessel construction and reconstruc- tion during some future period. In exchange for the Participant’s under- taking, MARAD commits the United States to defer tax on monies deposited into the CCF to finance these vessel projects. Unlike other federal income tax benefits under the Internal Revenue Code, the tax benefits are contrac- tual, as agreed by MARAD and the Participant. MARAD regulations (published in 46 CFR Part 390) describe the rules for participation, the sources and measures for deposits, the timing and accounting for withdrawals, and other Agreement matters. MARAD/ IRS Joint Regulations (published in 46 CFR Part 391) govern a limited number of filing and accounting issues. Any U.S. citizen shipyard that owns or leases as least one U.S.-built, U.S.-flagged vessel operated in U.S. domestic or foreign commerce (an “Eligible Vessel”) is qualified to par- ticipate in the CCF Program. The shipyard will select an “Eligible Vessel” (or vessels), that will be the source of revenues to be deposited into the CCF. gplink.com Put Your Fleet at Your Fingertips gplink_halfpage.indd 1 1/14/2015 3:37:02 PM