50 CFR - § 259.1-259.10 - Capital Construction Fund Tax Regulations

87 Nat’l Marine Fish. Serv./NOAA, Comm. Pt. 259 fishery management plan for the spe cies to which the project applies, in which case the Federal share cannot exceed 90 percent of the total esti mated cost of the project. (d) Financial assistance award. If the Secretary approves or disapproves a proposal for a project, he or she will promptly give written notification, in cluding, if disapproved, a detailed ex planation of the reason(s) for the dis approval. (e) Restrictions. (1) The total cost of all items included for engineering, planning, inspection, and unforeseen contingencies in connection with any works to be constructed as part of such a proposed project shall not exceed 10 percent of the total cost of such works, and shall be paid by the state as a part of its contribution to the total cost of the project. (2) The expenditure of funds under this subpart may be applied only to projects for which a proposal has been evaluated under paragraph (b) of this section and approved by the Secretary, except that up to $25,000 each fiscal year may be awarded to a state out of the state’s regular apportionment to carry out an ‘‘enforcement agree ment.’’ An enforcement agreement does not require state matching funds. (f) Prosecution of work. All work must be performed in accordance with appli cable state laws or regulations, except when such laws or regulations are in conflict with Federal laws or regula tions such that the Federal law or reg ulation prevails. § 253.53 Other funds. (a) Funds for disaster assistance. (1) The Secretary shall retain sole author ity in distributing any disaster assist ance funds made available under sec tion 308(b) of the Act. The Secretary may distribute these funds after he or she has made a thorough evaluation of the scientific information submitted, and has determined that a commercial fishery failure of a fishery resource arising from natural or undetermined causes has occurred. Funds may only be used to restore the resource affected by the disaster, and only by existing methods and technology. Any fishery resource used in computing the states’ amount under the apportionment for mula in § 253.601(a) will qualify for funding under this section. The Federal share of the cost of any activity con ducted under the disaster provision of the Act shall be limited to 75 percent of the total cost. (2) In addition, pursuant to section 308(d) of the Act, the Secretary is au thorized to award grants to persons en gaged in commercial fisheries for unin sured losses determined by the Sec retary to have been suffered as a direct result of a fishery resource disaster. Funds may be distributed by the Sec retary only after notice and oppor tunity for public comment of the ap propriate limitations, terms, and con ditions for awarding assistance under this section. Assistance provided under this section is limited to 75 percent of an uninsured loss to the extent that such losses have not been compensated by other Federal or State Programs. (b) Funds for interstate commissions. Funds authorized to support the efforts of the three chartered Interstate Ma rine Fisheries Commissions to develop and maintain interstate fishery man agement plans for interjurisdictional fisheries will be divided equally among the Commissions. § 253.54 Administrative requirements. Federal assistance awards made as a result of this Act are subject to all Federal laws, Executive Orders, Office of Management and Budget Circulars as incorporated by the award; Depart ment of Commerce and NOAA regula tions; policies and procedures applica ble to Federal financial assistance awards; and terms and conditions of the awards. PART 259—CAPITAL CONSTRUC TION FUND TAX REGULATIONS Sec. 259.1 Definitions. 259.2 Applying for a Capital Construction Fund Agreement (‘‘Agreement’’). 259.3 Acquisition, construction, or recon struction. 259.4 Constructive deposits and with drawals; ratification of withdrawals (as qualified) made without first having ob tained Secretary’s consent; first tax year for which an Agreement is effective. 259.5 Maximum deposit amounts and time to deposit. 88 50 CFR Ch. II (10–1–23 Edition) § 259.1 259.6 Termination of inactive and zero bal ance accounts. 259.7 Annual deposit and withdrawal reports required. 259.8 CCF accounts. 259.9 Conditional consents to withdrawal qualification. 259.10 Miscellaneous. 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 means Chapter 535 of Title 46 of the U.S. Code (46 U.S.C. 53501–53517), as may be amended from time to time. Agreement means the contract to par ticipate in the program between the approved CCF applicant (party) and the Secretary. Agreement vessel means any eligible vessel or qualified vessel which is sub ject to an Agreement. Citizen of the United States means any person who is a United States citizen and any corporation or partnership or ganized under the laws of any state which meets the requirements for doc umenting vessels in the U.S. coastwise trade. Commercial fishing means fishing in which the fish harvested, either in whole or in part, are intended to enter commerce or enter commerce through sale, barter or trade. Depository means the bank or broker age account(s) listed in the Agreement where the CCF funds will be physically held. Eligible vessel means— (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 con tract 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 do mestic 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 Docu mented 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 fish eries of the United States. Extension period means the first day following the end of the Filing period and ending on the last day of the par ty’s last filing extension. Filing period means the first day fol lowing the end of the Tax Year and ending on the party’s last day to file their tax return absent a filing exten sion. Limited Access System means a system that limits participation in a fishery to those satisfying certain eligibility cri teria or requirements contained in a fishery management plan or associated regulation. Qualified vessel means— (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 con tract 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 fish eries 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; 89 Nat’l Marine Fish. Serv./NOAA, Comm. § 259.2 (ii) State registered if at least 2 net tons but fewer than 5 net tons or Docu mented 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 fish eries 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 means the section of the Agreement that designates the income producing vessel from which deposits are made to a designated account. Schedule B means the section of the Agreement that designates the quali fied project for which the CCF funds are to be expended. Secretary means the Secretary of Commerce with respect to eligible or qualified vessels operated or to be oper ated in the fisheries of the United States. Tax due date means the date the par ty’s Federal tax return must be filed, including extensions, with the Internal Revenue Service. Tax year means the period between January 1 and December 31 for Cal endar year filers or the designated fis cal year for fiscal year filers. United States means the United States of America and, for citizenship purposes, includes the Commonwealth of Puerto Rico, American Samoa, Guam, the U.S. Virgin Islands, the Re public of the Marshall Islands, the Fed erated States of Micronesia, the Com monwealth of the Northern Mariana Is lands, and any other commonwealth, territory, or possession of the United States, or any political subdivision of any of them. § 259.2 Applying for a Capital Con struction Fund Agreement (‘‘Agree ment’’). (a) General qualifications. To be eligi ble to enter into an Agreement an ap plicant must: (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 ac quire, 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 fish eries of the United States. If the vessel is 5 net tons or over, it must be docu mented with a fishery trade endorse ment. Dual documentation in both the fisheries and the coastwise trade of the United States is permissible. Any ves sel 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 fish ing parties for hire will constitute its primary activity. (b) Content of application. Applicants seeking an Agreement must submit a formal application providing the fol lowing information: (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 applica tions for an Agreement relating to the previous taxable year may be received); (4) The following information regard ing each eligible vessel which is to be in corporated in Schedule A of the Agree ment: (i) Name of vessel, (ii) Official number or, in the case of vessels weighing under 5 net tons, the State registration number, where re quired, (iii) Type of vessel (i.e., catching ves sel, processing vessel, transporting ves sel, charter vessel, barge, passenger carrying fishing vessel, etc.), (iv) General characteristics (i.e., net tonnage, fish-carrying capacity, age, length, type of fishing gear, number of 90 50 CFR Ch. II (10–1–23 Edition) § 259.3 passengers carried or in the case of ves sels operating in the foreign or domes tic commerce the various uses of the vessel, etc.), (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 redeliv ery and place of reconstruction, (viii) Trade (or trades) in which the vessel is documented and date last doc umented, (ix) The fishery of operation (which in this section means each species or group of species). Each species must be specifically identified by the accept able 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 geo graphic 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., catching, processing, transporting, or passenger carrying fishing vessels), (iii) General characteristics (i.e., net tonnage, fish-carrying capacity, age, length, type of fishing gear, number of passengers carried), (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, to gether with sufficient additional evi dence 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 con struction, acquisition, or reconstruc tion 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. The application must be signed and submitted to the Financial Services Division of the National Ma rine Fisheries Service. As a general rule, the Agreement must be executed and entered into by the taxpayer on or prior to the due date for the filing of the Federal tax return in order to be effective for the tax year to which that return relates. It is in the Applicant’s best interest to file at least 45 days in advance of such date. § 259.3 Acquisition, construction, or re construction. CCF funds cannot be used for any vessel acquisition, construction, or re construction that increases harvesting capacity in a fishery or fisheries, other than in a limited access system in which the fisheries management au thority establishes harvesting limits. (a) Acquisition. CCF funds can be used to acquire any used qualified vessel that will fish in a limited access sys tem in which the fisheries management authority establishes harvesting lim its. If the fishery or fisheries is not a limited access system, CCF funds can only be used to replace an existing, re cently sunken, or scrapped vessel and its existing harvesting capacity. The replaced vessel must lose its fisheries trade endorsement and the vessel owner must notify the Coast Guard Documentation Center of that fact. (b) Construction. CCF funds can be used to construct a new qualified vessel that will fish in a limited access sys tem in which the fisheries management authority establishes harvesting lim its. If the fishery or fisheries is not a limited access system, CCF funds can only be used to replace an existing, re cently sunken, or scrapped vessel and its existing harvesting capacity. The replaced vessel must lose its fisheries 91 Nat’l Marine Fish. Serv./NOAA, Comm. § 259.4 trade endorsement and the vessel owner must notify the Coast Guard Documentation Center of that fact. (c) Reconstruction. Reconstruction may include rebuilding, replacing, re conditioning, refurbishing, repairing, converting and/or improving any por tion of a vessel. A reconstruction project must, however, either substan tially prolong the useful life of the re constructed vessel, increase its value, materially increase its safety, reli ability, or energy efficiency, or adapt it to a different commercial use in the fishing trade or industry. No vessel more than 25 years old at the time of withdrawal shall be a qualified vessel for the purpose of reconstruction un less a special showing is made, to the Secretary’s discretionary satisfaction, that the type and degree of reconstruc tion intended will result in an efficient and productive vessel with an economi cally useful life of at least 10 years be yond the date reconstruction is com pleted. (d) Time permitted for construction or reconstruction. Construction or recon struction must be completed within 18 months from the date construction or reconstruction first commences, unless otherwise consented to by the Sec retary. § 259.4 Constructive deposits and with drawals; ratification of withdrawals (as qualified) made without first having obtained Secretary’s con sent; first tax year for which an Agreement is effective. (a) Constructive deposits and with drawals (before Agreement executed date). Constructive deposits and withdrawals are deemed to have been deposited to and withdrawn from a designated CCF account even though the funds were not physically deposited. Constructive deposits and withdrawals shall be per missible only during the ‘‘Tax Year’’ for which a written application for an Agreement is submitted to the Sec retary. Once the Secretary executes the Agreement, the constructive de posit and withdrawal period ends. All deposits must be physically deposited into a designated CCF account. (1) All qualified deposits and expendi tures occurring within the period speci fied directly above, that are within the eligible ceilings specified at 46 U.S.C. 53505, may be consented to by the Sec retary as constructive deposits and withdrawals. In order for the Secretary to provide his or her consent for con structive deposit and withdrawal treat ment, 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 ‘‘Exten sion Period’’ for that party’s initial tax year. (2) [Reserved] (b) Constructive deposits and with drawals (after the Agreement effective date). The Secretary shall not permit constructive deposits or withdrawals after the effective date of an Agree ment. Deposits made after the effective date of an Agreement must be phys ically deposited into a dedicated CCF account. (c) First tax year for which an Agree ment is effective. In order for an Agree ment to be effective for any applicant’s ‘‘Tax Year,’’ the written application must be submitted to the Secretary be fore the end of the ‘‘Filing Period’’ or ‘‘Extension Period’’ for that tax year, whichever applies. If the written appli cation is received by the Secretary, after the end of the ‘‘Filing Period’’ or ‘‘Extension Period,’’ whichever applies, then the Agreement will be first effec tive for the next succeeding ‘‘Tax Year.’’ (1) It is in the applicant’s best inter est to submit his or her written appli cation 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 appli cation 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 ob tained Secretary’s prior consent. Any withdrawals made after the effective date of an Agreement without the Sec retary’s consent are automatically 92 50 CFR Ch. II (10–1–23 Edition) § 259.5 non-qualified withdrawals, unless the Secretary subsequently consents to them by ratification. (1) The Secretary may ratify, as qualified, any withdrawal made with out the Secretary’s prior consent, pro vided the withdrawal would have re sulted 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 retro active consent for withdrawals made without his or her consent, then those withdrawals, and any associated pen alties, will be deemed due to the par ty’s failure to apply in a timely man ner. (3) It is recommended that a party submit his or her request for with drawal at least 45 days in advance of the expected date of withdrawal. With drawals 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 with drawal 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 re sult 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 objec tive 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 rati fication to the withdrawal. (5) Redeposit of any withdrawals made without the Secretary’s consent, and for which such consent is not sub sequently 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 depos ited 100 percent of the anticipated cost of all Schedule B objectives unless the Agreement is then amended to estab lish 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 suffi cient 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 Agree ment is considered inactive and subject to termination. (b) If the account balance of all de positories of an Agreement is zero dol lars 10 years after the date it was es tablished, and has not been extended through amendment, the Agreement is considered inactive and subject to ter mination unless its Schedule B objec tive 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 defi ciencies identified in the letter are ad dressed. § 259.7 Annual deposit and withdrawal reports required. (a) The Secretary will require from each party an annual deposit and with drawal 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 re port 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 de pository. (2) Each report must bear a certifi cation that the deposit and withdrawal information given includes all annual 93 Nat’l Marine Fish. Serv./NOAA, Comm. § 259.10 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 dis cretion, may, after due notice, dis qualify withdrawals and/or involun tarily terminate the Agreement for the participant’s failure to submit the re quired annual deposit and withdrawal reports. (c) Additionally, each party shall submit, not later than 30 days after ex piration 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 no tice, be cause for the same adverse ac tion specified in paragraph (b) of this section. § 259.8 CCF accounts. (a) General. Each CCF account in a scheduled depository shall have an ac count number, which must be reflected on the reports required by § 259.7. All CCF accounts shall be reserved only for CCF transactions. There shall be no intermingling of CCF and non-CCF transactions and there shall be no pool ing of 2 or more CCF accounts without the prior consent of the Secretary. Safe deposit boxes, safes, or the like shall not be eligible CCF depositories with out the Secretary’s consent, which shall be granted solely at his or her discretion. (b) Assignment. The use of funds held in a CCF depository for transactions in the nature of a countervailing balance, compensating balance, pledge, assign ment, or similar security arrangement shall constitute a material breach of the Agreement unless prior written consent of the Secretary is obtained. (c) Depositories. Section 53506(a) of the Act provides that amounts in a CCF ac count must be kept in a depository or depositories specified in the Agree ments and be subject to such trustee or other fiduciary requirements as the Secretary may require. Unless other wise specified in the Agreement, the party may select the type or types of accounts in which the assets of the Fund may be deposited. § 259.9 Conditional consents to with drawal qualification. The Secretary may conditionally consent to the qualification of a with drawal. This consent is conditioned upon the timely submission, to the Secretary, of the items requested by the Secretary in the withdrawal ap proval letter. Failure to provide these items in a timely manner, and after due notice, will result in nonqualifica tion of the withdrawal and/or involun tary termination of the Agreement. § 259.10 Miscellaneous. (a) Wherever the Secretary prescribes time constraints, the postmark date shall control if mailed. If a private de livery service is used, including Fed eral Express or United Parcel Service, the date listed on the label shall con trol. Submission of CCF transactions by email or facsimile is only allowable when an original signature is not re quired. (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, di rectly or indirectly, the identity of the fund holder. (c) While recognizing that precise regulations are necessary in order to treat similarly situated parties simi larly, the Secretary also realizes that precision in regulations can sometimes cause inequitable effects to result from unavoidable, unintended, or minor dis crepancies between the regulations and the circumstances they attempt to govern. The Secretary will, con sequently, at his or her discretion, as a matter of privilege and not as a matter of right, attempt to afford relief to par ties where literal application of the purely procedural, as opposed to sub stantive, aspects of these regulations would otherwise work an inequitable hardship. This privilege will be spar ingly 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 en tered into (or amended) on or after the date these sections are adopted. 94 50 CFR Ch. II (10–1–23 Edition) § 259.10 (e) These §§ 259.1 through 259.10 are specifically incorporated in all Agree ments existing prior to the date these sections are adopted.