In General .—
section 53513 of this titleExcept as provided in , a withdrawal from a fund that is not a qualified withdrawal shall be treated as a nonqualified withdrawal.
Order of Withdrawals .—
A nonqualified withdrawal shall be treated as made—
first from the ordinary income account;
second from the capital gain account; and
third from the capital account.
Tax Treatment .—
26 U.S.C. 1For purposes of the Internal Revenue Code of 1986 ( et seq.)—
a nonqualified withdrawal from the ordinary income account shall be included in income as an item of ordinary income for the taxable year in which the withdrawal is made;
a nonqualified withdrawal from the capital gain account shall be included in income for the taxable year in which the withdrawal is made as an item of gain realized during that year from the disposition of an asset held for more than 6 months; and
for the period through the last date prescribed for payment of tax for the taxable year in which the withdrawal is made—
26 U.S.C. 660126 U.S.C. 6651 no interest shall be payable under section 6601 of such Code () and no addition to the tax shall be payable under section 6651 of such Code ();
interest on the amount of the additional tax attributable to an amount treated as a nonqualified withdrawal from the ordinary income account or the capital gain account shall be paid at the rate determined under subsection (d) from the last date prescribed for payment of the tax for the taxable year for which the amount was deposited in the fund; and
section 53512 of this title no interest shall be payable on amounts treated as withdrawn on a last-in-first-out basis under .
Interest Rate .—
The rate of interest under subsection (c)(3)(B) for a nonqualified withdrawal made in a taxable year beginning after 1971 shall be determined and published jointly by the Secretary and the Secretary of the Treasury. The rate shall be such that its relationship to 8 percent is comparable, as determined by the Secretaries under joint regulations, to the relationship between—
the money rates and investment yields for the calendar year immediately before the beginning of the taxable year; and
the money rates and investment yields for the calendar year 1970.
Nonqualified Withdrawals .—
In general .—
If the amount remains in the fund at the close of the— | The applicable percentage is— |
|---|---|
26th taxable year | 20 percent |
27th taxable year | 40 percent |
28th taxable year | 60 percent |
29th taxable year | 80 percent |
30th taxable year | 100 percent. |
Earnings .—
The earnings of a capital construction fund for any taxable year (except net gains) shall be treated under this subsection as an amount deposited for the taxable year.
Contract for qualified withdrawal .—
Under paragraph (1), an amount shall not be treated as remaining in a capital construction fund at the close of a taxable year to the extent there is a binding contract at the close of the taxable year for a qualified withdrawal of the amount for an identified item for which the withdrawal may be made.
Excess earnings .—
If the Secretary determines that the balance in a capital construction fund exceeds the amount appropriate to meet the vessel construction program objectives of the person that established the fund, the amount of the excess shall be treated as a nonqualified withdrawal under paragraph (1) unless the person develops appropriate program objectives within 3 years to dissipate the excess.
Amounts in fund on .—
Under this subsection, amounts in a capital construction fund on , shall be treated as having been deposited in that fund on that date.
Tax Determinations .—
In general .—
For a taxable year for which there is a nonqualified withdrawal (including an amount treated as a nonqualified withdrawal under subsection (e)), the tax imposed by chapter 1 of the Internal Revenue Code of 1986 (26 U.S.C. ch. 1) shall be determined by—
excluding the withdrawal from gross income; and
26 U.S.C. 1 increasing the tax imposed by chapter 1 of such Code by the product of the amount of the withdrawal and the highest tax rate specified in section 1 (or section 11 for a corporation) of such Code (, 11).
Maximum tax rate .—
11 See References in Text note below. 26 U.S.C. 1(h)For that portion of a nonqualified withdrawal made from the capital gain account during a taxable year to which section 1(h) or 1201(a) of such Code (, 1201(a)) applies, the tax rate used under paragraph (1)(B) may not exceed 20 percent (or 34 percent for a corporation).
Tax benefit rule .—
If any portion of a nonqualified withdrawal is properly attributable to deposits (except earnings on deposits) made by the taxpayer in a taxable year that did not reduce the taxpayer’s liability for tax under chapter 1 of such Code (26 U.S.C. ch. 1) for a taxable year before the taxable year in which the withdrawal occurs—
that portion shall not be taken into account under paragraph (1); and
26 U.S.C. 172 an amount equal to that portion shall be allowed as a deduction under section 172 of such Code () for the taxable year in which the withdrawal occurs.
Coordination with deduction for net operating losses .—
26 U.S.C. 172(b)(2)A nonqualified withdrawal excluded from gross income under paragraph (1) shall be excluded in determining taxable income under section 172(b)(2) of such Code ().
Pub. L. 109–304, § 8(c)120 Stat. 1597Pub. L. 112–240, title I, § 102(c)(1)(E)126 Stat. 2319(, , ; , , .)
In subsection (c)(3)(C), the words “or in the case of any nonqualified withdrawal arising from the application of the recapture provision of section 1176(5) of this Appendix as in effect on ” are omitted as obsolete.
In subsection (d), the words “made in a taxable year beginning in 1970 or 1971 is 8 percent” are omitted as obsolete.
Editorial Notes
References in Text
act Aug. 16, 1954, ch. 73668A Stat. 320Pub. L. 115–97, title I, § 13001(b)(2)(A)131 Stat. 2096Section 1201 of such Code, referred to in subsec. (f)(2), means section 1201 of the Internal Revenue Code of 1986, , , which was repealed by , , , applicable to taxable years beginning after .
Amendments
Pub. L. 112–2402013—Subsec. (f)(2). substituted “20 percent” for “15 percent”.
Statutory Notes and Related Subsidiaries
Effective Date of 2013 Amendment
Pub. L. 112–240section 102(d)(1) of Pub. L. 112–240section 1 of Title 26Amendment by applicable to taxable years beginning after , see , set out as a note under , Internal Revenue Code.
Application of Sunset Provision to Subsection (f)(2)
Pub. L. 110–181, div. C, title XXXV, § 3528122 Stat. 603
Public Law 108–2726 U.S.C. 1section 53511(f)(2) of title 46“For purposes of section 303 of the Jobs and Growth Tax Relief Reconciliation Act of 2003 (, [former] note), the amendment made by section 301(a)(2)(E) of that Act [which amended section 1177(h)(6)(A) of the former Appendix to this title from which subsec. (f)(2) of this section was derived by substituting “15 percent” for “20 percent”] shall be deemed to have been made to , United States Code.”
, , , provided that:
Section 303 of Pub. L. 108–27Pub. L. 112–240, title I, § 102(a)126 Stat. 2318[ was repealed by , , .]