IRS Focuses on Foreign Vessels Evaiding Taxes

Tuesday, November 03, 2009

The Offshore Marine Service Association (OMSA) applauded the Internal Revenue Service’s (IRS) recently posted directive to field officers establishing an issue management team in the wake of an IRS analysis indicating that a significant number of foreign vessels permitted to work in the U.S. offshore oil and gas industry aren’t complying with U.S. filing requirements.

In the directive, posted last week on the IRS web site, Keith M. Jones, the IRS industry director of  Natural Resources and Construction (NRC), noted that, “In recent years, an increased number of foreign vessels have applied to enter and work in the OCS (Outer Continental Shelf).  Our analysis indicates that a significant number of foreign vessels permitted to work in the OCS do not comply with U.S. filing requirements.”

OMSA President Ken Wells said, “This is a bad time for anyone to be seen as a tax cheat in America, let alone a foreign corporation.  There have been a lot of news stories recently about shortfalls in tax revenues because of the recession.  It is more important than ever for the IRS to close in on foreign companies that have been sidestepping their U.S. tax obligations.”

The IRS identified three types of activity in its directive:
1. Contractors that perform services on the OCS (such as seismographic testing, drilling, repair and salvage work)
2. Vessel operators that transport supplies and personnel between U.S. ports and locations on the OCS
3. Owners and/or operators of foreign-registered vessels that bareboat or time charter to persons that are engaged in activities related to the offshore exploration or exploitation

OMSA represents the owners and operators of U.S. flag offshore service vessels and the shipyards and other businesses that support that industry.  reacted to the announcement saying, “This confirms something we have suspected for a long time – that many of the foreign vessels that work off the U.S. coast on mineral leases granted by the U.S. government and reap the benefits of America’s offshore oil and gas sector have not been paying U.S. taxes."

Wells noted that, under the IRS guidance, if a foreign vessel doesn’t pay taxes on work done here in the United States, the charterer of the vessel must pay the IRS a 30% withholding to cover taxes that should have been paid.  “There have simply been too many instances in which foreign vessels were able to significantly undercut the rates offered by U.S. vessels.  Clearly if the foreign boats are able to start out with a 30% beneficial cost differential that makes it hard for Americans to compete.”

He cited one example in which a company publically reported that it had to pay the IRS $3.2m because foreign vessels it chartered had not paid U.S. taxes.  He urged the IRS to also look at whether the foreign vessels are making the proper income tax withholdings for foreign laborers who work in offshore sector.

According to Wells, this announcement comes at a time when the Customs and Border Protection Agency is reviewing a number of its rulings which have permitted foreign vessels to carry a substantial amount of cargo to offshore projects.  The review by Customs of the foreign vessel activity falls under a law called the Jones Act that prohibits foreign vessels from transporting cargo between U.S points.  “We see the two initiatives as linked,” Wells said, “not only do we believe these vessels have been carrying cargo that only U.S. vessels should carry, but now we find out they are cheating our country out of tax revenue as well.”

The full text of the IRS field guidance may be accessed at:www.irs.gov/businesses/article/0,,id=214906,00.html

Maritime Reporter October 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Legal

Shipbuilding Regulations: Cents and Sensibility

Addressing the Jones Act is just one aspect of an increasingly complicated boatbuilding environment. Stovepiped, poorly conceived regulations is another. The sting of the recession is fading,

How Difficult is it to Obtain a Jones Act Waiver?

The American Salvage Association’s Jon Waldron provides the ultimate cabotage primer. There always seems to be constant chatter about waiving the Jones Act. In reality,

Will Congress Pass Any Maritime Legislation in 2014?

Following its usual summer break over August 2014, Congress came back from its five-week summer recess and spent a whopping eight days or so back in session before recessing once again,

Offshore

Strategy Can Maximize UKCS potential

Companies operating in the North Sea require a cultural shift to make the most of the its potential, according to a new report from Deloitte, the business advisory firm.

Pile Testing for Wikinger Wind Farm Launched

In October 2014 the first phase of the pile testing campaign for the Wikinger offshore wind farm project was launched after the site’s geotechnical investigation on the Baltic Sea had been completed.

Damen, Palfinger Upgrade North Sea Jack-Up Rig

With the support of Palfinger systems JUMP technology, Damen Shiprepair Vlissingen has completed an upgrade of a Keppel Fels ‘N’ Class drilling rig, one of the largest in the North Sea,

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Naval Architecture Navigation Pipelines Pod Propulsion Salvage Ship Simulators Sonar
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1474 sec (7 req/sec)