AMO Currents - MARAD authorization includes tax relief proposal for U.S. mariners aboard international LNG tankers

AMO Currents - Posted: June 12, 2008

MARAD authorization includes tax relief proposal for U.S. mariners aboard international LNG tankers

The Department of Transportation has proposed "tax relief" for U.S. merchant mariners employed on foreign-flagged liquefied natural gas tankers.

Under the proposal — submitted to Congress by Transportation Secretary Mary Peters last month — money earned by U.S. mariners on the LNG ships would be exempt from federal income tax.

The proposal "reinforces the tax incentives enacted in 2004 to reduce the significant competitive disparity in tax burdens by granting limited tax relief to certain merchant mariners," according to DOT’s analysis.

"Most major maritime nations, including traditional maritime nations with developed economies similar to our own and flag-of-convenience nations, either do not tax or sharply reduce taxes on the income of their mariners in international shipping," the analysis noted. "Seafarers on United Kingdom-flag vessels, for example, are granted a complete tax rebate for income earned on vessels in international trade if they do not reside or work at home for more than six months."

To qualify for the income tax exemption, a mariner would have to be "a citizen or resident of the United States," licensed or certified by the U.S. Coast Guard, and working aboard "a liquefied natural gas vessel operated under the registry of a foreign country." The mariner would have to provide "documentation satisfactory to the Internal Revenue Service verifying the vessel the individual served on."

The tax exemption proposal was part of a broader draft bill to authorize programs of the Maritime Administration in fiscal 2009. The bill included $174 million for the Maritime Security Program, which sustains 60 U.S.-flagged cargo ships in international trade. The ships and their crews are available on demand to the Department of Defense for strategic sealift and other military support services."

The draft bill would also authorize "the construction and reconstruction of suitable training vessels" to replace aging vessels at state-operated maritime academies, extend the War Risk Insurance program through December 2015, and authorize a "Port Improvement Enterprise Program."

In her letters to the House of Representatives and the Senate, Peters said the White House Office of Management and Budget "advises that there is no objection to the presentation of this proposed legislation to Congress and that its enactment would be in accord with the program of the President."