United States vessel investment credit

(a) In general Subpart E of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 48E the following new section: 48F. United States vessel investment credit (a) In general For purposes of section 46, the United States Vessel Investment credit for any taxable year is an amount equal to the applicable percentage of any qualified investment for such taxable year with respect to any qualified vessel. (b) Applicable percentage For purposes of subsection (a), the applicable percentage with respect to any qualified vessel shall be an amount equal to the sum of— (1) 33 percent, plus (2) in the case of any qualified vessel for which the owner of such vessel will, as part of the agreement described in subsection (d)(1)(F) and for the duration of such agreement, obtain protection and indemnity insurance with respect to such vessel from an insurance company that is domiciled and headquartered in the United States and is an underwriter that is approved by the Maritime Administrator, 5 percent, plus (3) in the case of any qualified vessel which is classified by and designed in accordance with the rules of the American Bureau of Shipping or any other classification society headquartered in the United States and recognized by the Secretary of the department in which the Coast Guard is operating in accordance with section 3316 of title 46, United States Code, 2 percent. (c) Qualified investment For purposes of subsection (a), the qualified investment with respect to any qualified vessel is equal to the amount paid or incurred by the taxpayer in connection with the construction, repowering, or reconstruction of such vessel— (1) in a shipyard of the United States, and (2) by an entity which is not a foreign entity of concern. (d) Qualified vessel (1) In general For purposes of this section, the term qualified vessel means a cargo vessel— (A) which is a United States flag vessel (as defined in section 1355), (B) which, in the case of any repowering or reconstruction of such vessel, was originally constructed in the United States, (C) which operates in providing transportation in the United States foreign trade (as such term is defined in section 1355(a)), (D) which is not a passenger vessel, as defined in section 2101 of title 46, United States Code, (E) which is— (i) a bulk carrier vessel, (ii) a tanker vessel, (iii) a roll-on/roll-off vessel, (iv) a container vessel, (v) a multi-purpose vessel, (vi) a cable vessel, (vii) a heavy-lift vessel, or (viii) any other type of vessel determined appropriate by the Maritime Administrator, (F) which, pursuant to an agreement between the taxpayer and the Maritime Administrator, operates as a vessel of the United States for a period of not less than 10 years, (G) which has entered into an emergency preparedness agreement under section 53107 or 53407 of title 46, United States Code, or a contingency agreement under section 53207 of such title, or has otherwise entered into a voluntary agreement and plan of action with the Administrator of the Maritime Administration as authorized under section 708(c) of the Defense Production Act of 1950 (50 U.S.C. 4558(c)), and (H) the construction of which begins before January 1, 2033. (2) Exclusion related to foreign entities of concern The term qualified vessel shall not include a vessel which— (A) is, or was previously, owned or operated by a foreign entity of concern, (B) was constructed, repowered, or reconstructed in a shipyard which is owned or operated by a foreign entity of concern, or (C) was registered as a vessel of a foreign country of concern at any time prior to being placed in service by the taxpayer. (e) Definitions For purposes of this section— (1) Foreign country of concern The term foreign country of concern means— (A) a country that is a covered nation (as defined in section 4872(d) of title 10, United States Code), and (B) any country that the Maritime Administrator, in consultation with the Secretary of Defense, the Secretary of State, the Director of National Intelligence, and the Chair of the Federal Maritime Commission, determines to be engaged in conduct that is detrimental to the national security or foreign policy of the United States. (2) Foreign entity The term foreign entity — (A) means— (i) a government of a foreign country or a foreign political party, as those terms are defined in section 1 of the Foreign Agents Registration Act of 1938, as amended (22 U.S.C. 611), (ii) a natural person who is not a lawful permanent resident of the United States, a citizen of the United States, or any other protected individual (as such term is defined in section 274B(a)(3) of the Immigration and Nationality Act (8 U.S.C. 1324b(a)(3))), or (iii) a partnership, association, corporation, organization, or other combination of persons organized under the laws of or having its principal place of business in a foreign country, and (B) includes— (i) any person (including an owner or operator of a vessel) owned by, controlled by, or subject to the direction of an entity listed in subparagraph (A), (ii) any person, wherever located, who acts as an agent, representative, or employee of an entity listed in subparagraph (A), (iii) any person who acts in any other capacity at the order, request, or under the direction or control, of an entity listed in subparagraph (A), or of a person whose activities are directly or indirectly supervised, directed, controlled, financed, or subsidized in whole or in major part by an entity listed in subparagraph (A), (iv) any person who directly or indirectly through any contract, arrangement, understanding, relationship, or otherwise, owns 25 percent or more of the equity interests of an entity listed in subparagraph (A), (v) any person with significant responsibility to control, manage, or direct an entity listed in subparagraph (A), (vi) any person, wherever located, who is a citizen or resident of a country controlled by an entity listed in subparagraph (A), or (vii) any corporation, partnership, association, or other organization organized under the laws of a country controlled by an entity listed in subparagraph (A). (3) Foreign entity of concern The term foreign entity of concern means any foreign entity that is— (A) designated as a foreign terrorist organization by the Secretary of State under section 219 of the Immigration and Nationality Act (8 U.S.C. 1189), (B) included on the list of specially designated nationals and blocked persons maintained by the Office of Foreign Assets Control of the Department of the Treasury, (C) owned by, controlled by, or subject to the jurisdiction or direction of a government of a foreign country of concern, (D) alleged by the Attorney General to have been involved in activities for which a conviction was obtained under— (i) chapter 37 of title 18, United States Code (commonly known as the Espionage Act) (18 U.S.C. 792 et seq.), (ii) section 951 or 1030 of title 18, United States Code, (iii) chapter 90 of title 18, United States Code (commonly known as the Economic Espionage Act of 1996), (iv) the Arms Export Control Act (22 U.S.C. 2751 et seq.), (v) section 224, 225, 226, 227, or 236 of the Atomic Energy Act of 1954 (42 U.S.C. 2274, 2275, 2276, 2277, and 2284), (vi) the Export Control Reform Act of 2018 (50 U.S.C. 4801 et seq.), or (vii) the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.), (E) designated by the Federal Maritime Commission as a controlled carrier under chapter 407 of title 46, United States Code, (F) found by the Federal Maritime Commission to be practicing unfavorable conditions in foreign trade under chapter 421 or 423 of title 46, United States Code, or (G) determined by the Maritime Administrator, in consultation with the Secretary of Defense, the Secretary of State, the Director of National Intelligence, and the Chair of the Federal Maritime Commission, to be engaged in unauthorized conduct that is detrimental to the national security or foreign policy of the United States. (f) Certain progress expenditure rules made applicable Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of subsection (a). (g) Regulations The Secretary, in consultation with the Maritime Administrator, shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including any regulations or guidance which may be necessary or appropriate to recapture the benefit of any credit determined under this section with respect to any qualified vessel, or any increase in the applicable percentage under subsection (b) with respect to any qualified vessel, in the case of any taxpayer which fails to comply with the terms of the agreement described in subsection (d)(1)(F) with respect to such qualified vessel.. (b) Conforming amendments (1) Section 46 of the Internal Revenue Code of 1986, as amended by section 13702(b)(1) of Public Law 117–169, is amended— (A) in paragraph (6), by striking and at the end, (B) in paragraph (7), by striking the period at the end and inserting, and, and (C) by adding at the end the following: (8) the United States Vessel Investment credit.. (2) Section 49(a)(1)(C) of such Code, as amended by section 13702(b)(2) of Public Law 117–169, is amended— (A) in clause (vii), by striking and at the end, (B) in clause (viii), by striking the period at the end and inserting, and, and (C) by adding at the end the following: (ix) with respect to any qualified vessel (as defined in section 48F(d)), the portion of the basis of such vessel attributable to amounts paid or incurred by the taxpayer in connection with the construction, repowering, or reconstruction of such vessel.. (3) The table of sections for subpart E of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 48E the following new item: Sec. 48F. United States Vessel Investment credit.. (c) Recapture for failure To operate as a vessel of the United States Section 50(a) of the Internal Revenue Code of 1986 is amended— (1) in paragraph (4), by striking or any applicable transaction to which paragraph (3)(A) applies and inserting any applicable transaction to which paragraph (3)(A) applies, or any violation to which paragraph (6)(A) applies, (2) by redesignating paragraph (6) as paragraph (7), (3) by inserting after paragraph (5) the following new paragraph: (6) Failure to operate qualified vessel as a vessel of the United States (A) In general If an applicable taxpayer violates any of the requirements of the agreement described in section 48F(d)(1)(F) during the duration of such agreement with respect to any investment credit property which is eligible for the United States Vessel Investment credit under section 48F(a), then the tax under this chapter for the taxable year in which such violation occurs shall be increased by 100 percent of the aggregate decrease in the credits allowed under section 38 for all prior taxable years which would have resulted solely from reducing to zero any credit determined under section 46 which is attributable to the United States Vessel Investment credit under section 48F(a) with respect to such property. (B) Exception Subparagraph (A) shall not apply if the applicable taxpayer demonstrates to the satisfaction of the Secretary and the Maritime Administrator that the taxpayer is in compliance with the agreement described in section 48F(d)(1)(F) within 30 days of a determination and notice by the Secretary. (C) Regulations and guidance The Secretary shall issue such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this paragraph, including regulations or other guidance which provide for requirements for recordkeeping or information reporting for purposes of administering the requirements of this paragraph., and (4) in paragraph (7) (as redesignated by paragraph (2))— (A) in subparagraph (C), by striking or (3) and inserting (3), or (4), and (B) by striking subparagraph (E) and inserting the following: (E) Applicable taxpayer For purposes of this subsection, the term applicable taxpayer means any taxpayer who has been allowed— (i) for purposes of paragraph (3), a credit under section 48D(a) for any prior taxable year, or (ii) for purposes of paragraph (6), a credit under section 48F(a) for any prior taxable year.. (d) Elective payment and transfer of credit (1) Elective payment Section 6417 of the Internal Revenue Code of 1986 is amended— (A) in subsection (b), by adding at the end the following: (13) The United States Vessel Investment credit under section 48F., and (B) in subsection (d)(1)— (i) in subparagraph (E), by striking (C), or (D) each place it appears and inserting (C), (D), or (E), (ii) by redesignating subparagraph (E) (as amended by clause (i)) as subparagraph (F), and (iii) by inserting after subparagraph (D) the following: (E) Election with respect to United States vessel investment credit If a taxpayer other than an entity described in subparagraph (A) makes an election under this subparagraph with respect to any taxable year in which such taxpayer has made a qualified investment with respect to any qualified vessel (as defined in section 48F), such taxpayer shall be treated as an applicable entity for purposes of this section for such taxable year, but only with respect to the credit described in subsection (b)(13).. (2) Transfer Section 6418(f)(1)(A) of the Internal Revenue Code of 1986 is amended by adding at the end the following: (xii) The United States Vessel Investment credit under section 48F.. (e) Exception relating to alternative tax on qualifying shipping activities Section 1357(c) of the Internal Revenue Code of 1986 is amended— (1) in paragraph (1), by striking paragraph (2) and inserting paragraph (2) or (4), and (2) by adding at the end the following: (4) Exception for United States vessel investment credit Paragraph (1) shall not apply with respect to any credit allowed to the taxpayer under section 48F.. (f) Effective date The amendments made by this section shall apply to property placed in service after December 31, 2025.