50 CFR Part 259 — Capital Construction Fund Tax Regulations

PART 259—CAPITAL CONSTRUCTION FUND TAX REGULATIONS Authority: 46 U.S.C. 53501, formerly 46 U.S.C. App. 1177 and 1177-1. Source: 82 FR 24565, May 30, 2017, unless otherwise noted. § 259.1 Definitions. As used in this part: Act Agreement Agreement vessel Citizen of the United States Commercial fishing Depository Eligible vessel (1) A vessel— (i) Constructed in the United States (and, if reconstructed, reconstructed in the United States), constructed outside of the United States but documented under the laws of the United States on April 15, 1970, or constructed outside the United States for use in the United States foreign trade pursuant to a contract made before April 15, 1970; (ii) Documented under the laws of the United States if 5 net tons or greater; and (iii) Operated in the foreign or domestic commerce of the United States or in the fisheries of the United States; and (2) A commercial fishing vessel or vessel which will carry fishing parties for hire— (i) Constructed in the United States and, if reconstructed, reconstructed in the United States; (ii) State registered if at least 2 net tons but fewer than 5 net tons or Documented under the laws of the United States if 5 net tons or greater; (iii) Owned by a citizen of the United States; (iv) Having its home port in the United States; and (v) Operated in the commercial fisheries of the United States. Extension period Filing period Limited Access System Qualified vessel (1) A vessel— (i) Constructed in the United States (and, if reconstructed, reconstructed in the United States), constructed outside of the United States but documented under the laws of the United States on April 15, 1970, or constructed outside the United States for use in the United States foreign trade pursuant to a contract made before April 15, 1970; (ii) Documented under the laws of the United States if 5 net tons or greater; and (iii) Agreed, between the Secretary and the person maintaining the capital construction fund established under 46 U.S.C. 53503, to be operated in the fisheries of the United States; and (2) A commercial fishing vessel or vessel which will carry fishing parties for hire— (i) Constructed in the United States and, if reconstructed, reconstructed in the United States; (ii) State registered if at least 2 net tons but fewer than 5 net tons or Documented under the laws of the United States if 5 net tons or greater; (iii) Owned by a citizen of the United States; (iv) Having its home port in the United States; and (v) Operated in the commercial fisheries of the United States; and (3) Gear which is permanently fixed to the vessel. The expenditure for gear and certain nets which are not fixed to the vessel (pots, traps, longline, seine nets, gill set nets and gill drift nets) is excluded from the amount eligible for qualified withdrawals of CCF funds. Schedule A Schedule B Secretary Tax due date Tax year United States § 259.2 Applying for a Capital Construction Fund Agreement (“Agreement”). (a) General qualifications. (1) Be a citizen of the United States (citizenship requirements are those necessary for documenting vessels in the coastwise trade within the meaning of section 2 of the Shipping Act, 1916, as amended); (2) Own or lease one or more eligible vessels (as defined at 46 U.S.C. 53501) operating in the foreign or domestic commerce of the United States; (3) Have an acceptable plan to acquire, construct, or reconstruct one or more qualified vessels (as defined at 46 U.S.C. 53501). The plan must be a firm representation of the applicant's actual intentions. Qualified vessels must be for commercial operation in the fisheries of the United States. If the vessel is 5 net tons or over, it must be documented with a fishery trade endorsement. Dual documentation in both the fisheries and the coastwise trade of the United States is permissible. Any vessel which will carry fishing parties for hire must be inspected and certified (under 46 CFR part 176) by the U.S. Coast Guard as qualified to carry more than six passengers. If the vessel weighs fewer than 5 net tons the party must demonstrate to the Secretary's satisfaction that the carrying of fishing parties for hire will constitute its primary activity. (b) Content of application. (1) Name and Tax Identification Number (TIN) of applicant; (2) Proof of U.S. citizenship; (3) The first taxable year for which the Agreement is to apply (see § 259.4 for the latest time at which applications for an Agreement relating to the previous taxable year may be received); (4) The following information regarding each eligible vessel (i) Name of vessel, (ii) Official number or, in the case of vessels weighing under 5 net tons, the State registration number, where required, (iii) Type of vessel ( i.e., (iv) General characteristics ( i.e., (v) Whether it is owned or leased and, if leased, the name of the owner, and a copy of the lease, (vi) Date and place of construction, (vii) If reconstructed, date of redelivery and place of reconstruction, (viii) Trade (or trades) in which the vessel is documented and date last documented, (ix) The fishery of operation (which in this section means each species or group of species). Each species must be specifically identified by the acceptable common names of fish, shellfish, or other living marine resources which each vessel catches, processes, or transports or will catch, process, or transport for commercial purposes such as marketing or processing the catch), (x) The area of operation (which for fishing vessels means the general geographic areas in which each vessel will catch, process, or transport, or charter for each species or group of species of fish, shellfish, or other living marine resources), (5) The specific objectives to be achieved by the accumulation of assets in a Capital Construction Fund (to be incorporated in Schedule B of the Agreement) including: (i) Number of vessels, (ii) Type of vessel ( i.e., (iii) General characteristics ( i.e., (iv) Cost of projects, (v) Amount of indebtedness to be paid for vessels to be constructed, acquired, or reconstructed (all notes, mortgages, or other evidence of indebtedness must be submitted as soon as available, together with sufficient additional evidence to establish that full proceeds of the indebtedness to be paid from a CCF account under an Agreement, were used solely for the purpose of the construction, acquisition, or reconstruction of Schedule B vessels), (vi) Date of construction, acquisition, or reconstruction, (vii) Fishery of operation (which in this section means each species or group of species must be specifically identified by acceptable common name of fish, shellfish, or other living marine resources), and (viii) Area of operation (which in this section means the general geographic areas in which each vessel will operate for each species or group of species of fish, shellfish, or other living marine resources), (c) Filing. § 259.3 Acquisition, construction, or reconstruction. CCF funds cannot be used for any vessel acquisition, construction, or reconstruction that increases harvesting capacity in a fishery or fisheries, other than in a limited access system in which the fisheries management authority establishes harvesting limits. (a) Acquisition. (b) Construction. (c) Reconstruction. (d) Time permitted for construction or reconstruction. § 259.4 Constructive deposits and withdrawals; ratification of withdrawals (as qualified) made without first having obtained Secretary's consent; first tax year for which an Agreement is effective. (a) Constructive deposits and withdrawals (before Agreement executed date (1) All qualified deposits and expenditures occurring within the period specified directly above, that are within the eligible ceilings specified at 46 U.S.C. 53505, may be consented to by the Secretary as constructive deposits and withdrawals. In order for the Secretary to provide his or her consent for constructive deposit and withdrawal treatment, the applicant must include a written request with the application and provide sufficient supporting data to enable the Secretary to evaluate the request. This written request must be submitted no later than the “Extension Period” for that party's initial tax year. (2) [Reserved] (b) Constructive deposits and withdrawals (after the Agreement effective date (c) First tax year for which an Agreement is effective. (1) It is in the applicant's best interest to submit his or her written application at least 45 days in advance of the end of his or her tax due date. If the written application is submitted too close to the tax due date, and the Secretary is not ultimately able to execute the Agreement, the applicant must bear the burden of negotiating with the Internal Revenue Service for relief. The Secretary shall regard any penalties related to this denied application as due to the applicant's failure to apply for an Agreement in a timely manner. (2) [Reserved] (d) Ratification of withdrawals, as qualified, made without first having obtained Secretary's prior consent. (1) The Secretary may ratify, as qualified, any withdrawal made without the Secretary's prior consent, provided the withdrawal would have resulted in the Secretary's consent had it been requested before withdrawal. (2) The Secretary may issue his or her retroactive consent, if appropriate, as work priorities permit. However, if the Secretary is unable to issue retroactive consent for withdrawals made without his or her consent, then those withdrawals, and any associated penalties, will be deemed due to the party's failure to apply in a timely manner. (3) It is recommended that a party submit his or her request for withdrawal at least 45 days in advance of the expected date of withdrawal. Withdrawals made without the Secretary's consent, in reliance on obtaining the Secretary's consent, are made purely at a party's own risk. Should any withdrawal made without the Secretary's consent prove, for any reason, to be one which the Secretary will not or cannot consent to ratify, then the result will be an unqualified withdrawal and/or an involuntary termination of the Agreement. (4) Should a party withdraw CCF funds for a project not previously deemed an eligible Schedule B objective without having first obtained the Secretary's consent, the Secretary may entertain an application to amend the Agreement's Schedule B objectives as the prerequisite to consenting by ratification to the withdrawal. (5) Redeposit of any withdrawals made without the Secretary's consent, and for which such consent is not subsequently given (either by ratification or otherwise), shall not be permitted. If the non-qualified withdrawal adversely affects the Agreement's general status the Secretary may terminate the Agreement. § 259.5 Maximum deposit amounts and time to deposit. (a) Other than the maximum annual ceilings established by the Act, the Secretary shall not establish an annual ceiling. However, deposits can no longer be made once a party has deposited 100 percent of the anticipated cost of all Schedule B objectives unless the Agreement is then amended to establish additional Schedule B objectives. (b) Ordinarily, the Secretary shall permit deposits to accumulate prior to commencement of any given Schedule B objective for a maximum of ten years. However, at the Secretary's sole discretion and based on good and sufficient cause shown, the time period may be extended. § 259.6 Termination of inactive and zero balance accounts. (a) If a Schedule B objective has not commenced within 10 years from the date the Agreement was established, and has not been extended by written approval of the Secretary, the Agreement is considered inactive and subject to termination. (b) If the account balance of all depositories of an Agreement is zero dollars 10 years after the date it was established, and has not been extended through amendment, the Agreement is considered inactive and subject to termination unless its Schedule B objective has commenced. (c) A certified letter will be sent to holders of Agreements identified for termination informing them that the agreement will terminate 60 days after the date of the letter unless the deficiencies identified in the letter are addressed. § 259.7 Annual deposit and withdrawal reports required. (a) The Secretary will require from each party an annual deposit and withdrawal report for each CCF depository. Failure to submit such reports may be cause for involuntary termination of the party's Agreement. (1) A final deposit and withdrawal report at the end of the tax year, which shall be submitted not later than 30 days after expiration of the due date, for filing the party's Federal income tax return. The report must be made on a form prescribed by the Secretary using a separate form for each CCF depository. (2) Each report must bear a certification that the deposit and withdrawal information given includes all annual deposit and withdrawal activity for each CCF depository. Negative reports must be submitted in those cases where there is no deposit and/or withdrawal activity. (b) The Secretary, at his or her discretion, may, after due notice, disqualify withdrawals and/or involuntarily terminate the Agreement for the participant's failure to submit the required annual deposit and withdrawal reports. (c) Additionally, each party shall submit, not later than 30 days after expiration of the party's tax due date, a copy of the party's Federal Income Tax Return filed with IRS for the preceding tax year. Failure to submit the Federal Income Tax Return shall, after due notice, be cause for the same adverse action specified in paragraph (b) of this section. § 259.8 CCF accounts. (a) General. (b) Assignment. (c) Depositories. § 259.9 Conditional consents to withdrawal qualification. The Secretary may conditionally consent to the qualification of a withdrawal. This consent is conditioned upon the timely submission, to the Secretary, of the items requested by the Secretary in the withdrawal approval letter. Failure to provide these items in a timely manner, and after due notice, will result in nonqualification of the withdrawal and/or involuntary termination of the Agreement. § 259.10 Miscellaneous. (a) Wherever the Secretary prescribes time constraints, the postmark date shall control if mailed. If a private delivery service is used, including Federal Express or United Parcel Service, the date listed on the label shall control. Submission of CCF transactions by email or facsimile is only allowable when an original signature is not required. (b) All CCF information received by the Secretary shall be held strictly confidential to the extent permitted by law, except that it may be published or disclosed in statistical form provided such publication does not disclose, directly or indirectly, the identity of the fund holder. (c) While recognizing that precise regulations are necessary in order to treat similarly situated parties similarly, the Secretary also realizes that precision in regulations can sometimes cause inequitable effects to result from unavoidable, unintended, or minor discrepancies between the regulations and the circumstances they attempt to govern. The Secretary will, consequently, at his or her discretion, as a matter of privilege and not as a matter of right, attempt to afford relief to parties where literal application of the purely procedural, as opposed to substantive, aspects of these regulations would otherwise work an inequitable hardship. This privilege will be sparingly granted and no party should act in reliance on its being granted. (d) These §§ 259.1 through 259.10 are applicable to all Agreements first entered into (or amended) on or after the date these sections are adopted. (e) These §§ 259.1 through 259.10 are specifically incorporated in all Agreements existing prior to the date these sections are adopted.

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