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 36AUGUST 2016 • FOGHORN 23 LEGISLATIVEREPORT The deposited funds will eventually be used to construct a “Qualified Vessel” for a customer or for its own account. A “Qualified Vessel” may be under current construction for a third-party customer, or may be a vessel for which the shipyard hopes to obtain a future contract, or may be built on specula- tion for its own account. However, the “Eligible Vessel” must be constructed for operation in “qualified trades” (U.S. foreign trade, or for domestic Great Lakes, non-con- tiguous and “short sea” service).  The shipyard’s tax deferral benefit begins with the deposit of “Eligible Vessel” revenues with the deposi- tary, and ends when the shipyard withdraws money for use in the con- struction of or reconstruction of a ”Qualified Vessel.”  When the shipyard withdraws funds previously deposited in the CCF and uses them to build a “Qualified Vessel,’ that vessel’s federal income tax cost basis is reduced by an amount equivalent to the value of the with- drawals. For example, if withdrawals are made for a shipyard construction project for a third-party customer, and the entire project has been financed with CCF withdrawals, the shipyard tax cost basis will be zero. The entire shipyard sale proceeds will be subject to tax at sale.  And, the Shipyard will repay the entire deferred tax when the ”Qualified Vessel” is sold, unless the shipyard redeposits these vessel sales proceeds and extends the period of tax deferral.   In conclusion, 45 years after the CCF Program’s introduction, MARAD lists some 167 participants, evidence of widespread use by owners and operators and by owner-lessors in leasing transactions. However, almost 36 years since MARAD opened the CCF Program to shipyard partici- pation, only one large West Coast shipyard and one small U.S. Gulf of Mexico shipyard are listed as CCF participants.  Isn’t it time that more shipyards looked into the substantial tax value of the CCF Program? n  Mr. Cook was the MARAD General Counsel who was responsible for the 1970 Act CCF Program implementation. His work with the Program has included advice for both private sector clients, and in U.S. government projects (in work for MARAD itself and for the U.S. Navy) and is partially detailed at his  www.CookMaritimeFinance.com website. If you would like a copy of his PowerPoint slide set on “Sheltering Shipyard Profits to Benefit Customers,” or of his descriptive memo hand-out “MARAD CCF: Shipyard Program Use,” please email him at Cook@CookMaritimeFinance.com. For more information on the CCF Program, you can also contact Mr. Daniel Ladd, at MARAD’s Office of Financial Approvals” at (202) 366-5737 or daniel.ladd@dot.gov.