TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, April 27, 2012

U.S. Tax Incentives for Foreign Shipping Companies

Richard D. Lamb III (J.D. 2012, Loyola-New Orleans), Comment. Keeping U.S. Trade and International Shipping Afloat While the Global Economy Sinks: U.S. Tax Incentives and Procedure Concerning Foreign Shipping Companies, 10 Loy. Mar. L.J. 91 (2011):

Under § 883, the United States “grants an exemption from all income taxes for international ship-owners and operators.” This includes activities that are considered incidental to the international operation of ships. This comment explains the § 883 exemption, in particular Reg. § 1.883-1(g) and the procedures necessary to conform with U.S. tax laws are examined. Part II of this comment describes the shipping industry, its significance, and its current state in the global economy. Part III provides a history of § 883 in a context at explains the scope and intended purpose of the exemption. The history of the exemption is followed by an overview of § 883 in its modern day form, including the detailed rules for who may claim the exemption. Part IV thoroughly explains the modern day § 883 and breaks the section down into specific elements under the guidance of Treasury regulations, while also enveloping guidance from other IRS sources. Part V of this comment provides guidance to the procedures that must be used by foreign shipping companies to comply with Reg. § 1.883-1(g) so that a company's income is considered incidental to the international operation of ships and therefore eligible for the exemption. Part VI of this comment contains an explanation of the pertinent procedural aspects of the exemption and the shortcomings of these procedures as they pertain to Reg. § 1.883-1(g). This comment concludes with the proposal of some urgently needed improvements for efficient tax administration that will facilitate U.S. trade.

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