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Proposal would benefit naval
shipbuilders A provision in
the Foreign Sales Corporation/Extraterritorial
Income Conference Report would put naval
shipbuilders' tax payments on par with those paid by
commercial shipbuilders, helping out organizations
like Bath Iron Works. It would delay, but not
reduce, the taxes that a builder of a naval ship
pays on estimated profits earned upon delivery of
each ship, provided the construction or overhaul
takes two years or longer.
Naval shipbuilders are required now to pay tax on
a percentage of their expected profits while a ship
is being built. This revised tax treatment is
similar to how commercial shipbuilders pay income
tax. The conference report is awaiting the signature
of the president.
"Our naval shipbuilders at facilities like Bath
Iron Works are forced to pay income tax much earlier
than when they receive payments for the ship," said
Sen. Olympia Snowe, R-Maine, in a written statement.
"This is unfair, as they are forced to use capital
for early tax payments they otherwise could use to
modernize and strengthen their facilities."
The provision in the Conference Report would
permit Navy shipbuilders to pay 40 percent of their
estimated income tax during the contract and pay the
remaining 60 percent in the year in which
construction is completed. In addition, shipbuilders
will be able to report their taxes on a ship-by-ship
basis rather than on a contract-by-contract basis,
which reduces the potential for abuse.
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