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S 3359

110th CONGRESS
2d Session

S. 3359

To amend the Internal Revenue Code of 1986 to repeal the shipping investment withdrawal rules in section 955 and to provide an incentive to reinvest foreign shipping earnings in the United States.

IN THE SENATE OF THE UNITED STATES

July 29 (legislative day, July 28), 2008

Ms. CANTWELL (for herself and Mr. SMITH) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to repeal the shipping investment withdrawal rules in section 955 and to provide an incentive to reinvest foreign shipping earnings in the United States.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the `American Shipping Reinvestment Act of 2008'.

SEC. 2. REPEAL OF QUALIFIED SHIPPING INVESTMENT WITHDRAWAL RULES.

    (a) In General- Section 955 of the Internal Revenue Code of 1986 (relating to withdrawal of previously excluded subpart F income from qualified investment) is hereby repealed.

    (b) Conforming Amendments-

      (1) Section 951(a)(1)(A) of such Code is amended by adding `and' at the end of clause (i) and by striking clause (iii).

      (2) Section 951(a)(3) of such Code (relating to the limitation on pro rata share of previously excluded subpart F income withdrawn from investment) is hereby repealed.

      (3) Section 964(b) of such Code is amended by striking `, 955,'.

      (4) The table of sections for subpart F of part III of subchapter N of chapter 1 of such Code is amended by striking the item relating to section 955.

    (c) Effective Date- The amendments made by this section shall apply to taxable years of controlled foreign corporations ending on or after the date of the enactment of this Act, and to taxable years of United States shareholders in which or with which such taxable years of controlled foreign corporations end.

SEC. 3. TEMPORARY DIVIDENDS RECEIVED DEDUCTION FOR PREVIOUSLY UNTAXED FOREIGN BASE COMPANY SHIPPING INCOME.

    (a) In General- Section 965 of the Internal Revenue Code of 1986 (relating to temporary dividends received deduction) is amended by adding at the end the following new subsection:

    `(g) Temporary Dividends Received Deduction for Foreign Base Company Shipping Income-

      `(1) IN GENERAL- In the case of a corporation which is a United States shareholder and for which the election under this subsection is in effect for the taxable year, there shall be allowed as a deduction an amount equal to 85 percent of the cash distributions which are received during such taxable year by such shareholder from controlled foreign corporations to the extent that the distributions are attributable to income--

        `(A) which was derived by the controlled foreign corporation in taxable years beginning before January 1, 2005, and

        `(B) which would, without regard to the year earned, be described in section 954(f) (as in effect before the enactment of the American Jobs Creation Act of 2004).

      `(2) INDIRECT DIVIDENDS- A rule similar to the rule of subsection (a)(2) shall apply, determined by treating cash distributions which are so attributable as cash dividends.

      `(3) LIMITATION- The amount of dividends taken into account under this subsection shall not exceed the amount permitted to be taken into account under paragraphs (1), (3), and (4) of subsection (b), determined as if such paragraphs applied to this subsection.

      `(4) TAXPAYER ELECTION AND DESIGNATION- For purposes of paragraph (1), a United States shareholder may, on its return for the taxable year to which this subsection applies--

        `(A) elect to apply paragraph (3) of section 959(c) before paragraphs (1) and (2) thereof, and

        `(B) designate the extent, if any, to which a cash distribution reduces a controlled foreign corporation's earnings and profits attributable to--

          `(i) foreign base company shipping income (determined under section 954(f) as in effect before the enactment of the American Jobs Creation Act of 2004), or

          `(ii) other earnings and profits.

      `(5) ELECTION- The taxpayer may elect to apply this subsection to--

        `(A) the taxpayer's last taxable year which begins before the date of the enactment of this subsection, or

        `(B) the taxpayer's first taxable year which begins during the 1-year period beginning on such date.

      Such election may be made for a taxable year only if made on or before the due date (including extensions) for filing the return of tax for such taxable year.

      `(6) REDUCTION IN BENEFITS FOR FAILURE TO MAINTAIN EMPLOYMENT LEVELS-

        `(A) IN GENERAL- If, during the period consisting of the calendar month in which the taxpayer first receives a distribution described in paragraph (1) and the succeeding 23 calendar months, the taxpayer does not maintain an average employment level at least equal to the taxpayer's prior average employment, an additional amount equal to $25,000 multiplied by the number of employees by which the taxpayers average employment level during such period falls below the prior average employment (but not exceeding the aggregate amount allowed as a deduction pursuant to paragraph (1)) shall be taken into income by the taxpayer during the taxable year that includes the final day of such period.

        `(B) PRIOR AVERAGE EMPLOYMENT- For purposes of this paragraph, the taxpayer's `prior average employment' shall be the average number of employees of the taxpayer during the period consisting of the 24 calendar months immediately preceding the calendar month in which the taxpayer first receives a distribution described in paragraph (1).

        `(C) AGGREGATION RULES- In determining the taxpayer's average employment level and prior average employment, all domestic members of a controlled group (as defined in section 264(e)(5)(B)) shall be treated as a single taxpayer.'.

    (b) Conforming Amendment- Subsection (f) of section 965 of such Code is amended by inserting `other than subsection (g)' after `this section' in the material preceding paragraph (1).

    (c) Effective Date- The amendments made by this section shall apply to taxable years ending on or after the date of the enactment of this Act.

END