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Friday, April 20, 2018

NEW PROPOSED IRS REGULATIONS FOR SECTION 883 EXEMPTION

We have previously reported on new proposed IRS regulations for Section 883 Exemption and we have further developments to report.

INTERTANKO participates in a broad based carrier coalition under the leadership of CENSA to address the proposed changes in the so-called Section 883 Exemption and has now submitted comments on the expanded regulations under Section 883. Whilst we share and support the concerns of CENSA, the INTERTANKO comments are focused on aspects of the proposed change particularly relevant to the tanker industry such as for example changes affecting taxation of income from lightering operations.

In particular, our comments address: the exclusion by Prop. Reg. Section 1.883-1(f) of income derived from “the lightening trade” (as defined below) from the definition of the “international operation” of ships; the denial by Prop. Reg. Section 1.883-1(e)(2) of the right of a passive investor in a joint venture enterprise, which is engaged in the international operation of ships, to claim exemption under Section 883 for his pro rata share of joint venture profits; the imposition by Prop. Reg. Section 1.883-4(b)(3) on a foreign corporation claiming exemption under Section 883 of additional “flag” or “limitation on benefits” requirements contained in an income tax treaty between the United States and a foreign country in which the foreign corporation’s shareholders reside; the unduly complex, burdensome and intrusive nature of the reporting and disclosure requirements of Prop. Reg. Section 1.833-4, taking into account the objectives of Congress in amending Section 883 in the Tax Reform Act of 1986 (“1986 TRA”); and the retroactive nature of the currently proposed effective date of the Proposed Regulations which could preclude affected taxpayers from the opportunity to restructure their affairs to comply with the Proposed Regulations as ultimately finalized.

INTERTANKO will also support the efforts of the coalition through testimony at IRS hearing on the subject which will take place on June 8 at the Internal Revenue Building in Washington D.C.

For comments, questions or a copy of INTERTANKO's comments, please contact LegalandDocumentary@intertanko.com