Building Ships in America Act of 2025

Bill Number: S. 1536
Origin Chamber: Senate
Congress: 119th Congress, Session 1
Policy Area: Taxation
Status: Introduced
Latest Action: 2025-04-30: Read twice and referred to the Committee on Finance.
Last Updated: 2025-06-04T14:59:37Z

AI-Generated Summary

Building Ships in America Act of 2025

Purpose

The legislation aims to strengthen U.S. national defense and economic security by providing tax incentives to support the construction, operation, and maintenance of U.S. vessels, ports, shipyards, and the maritime workforce. It encourages domestic shipbuilding and maritime activities while restricting benefits from foreign entities that could pose security risks, such as those from countries like China.

Key Provisions

United States Vessel Investment Credit (Section 2): Offers a tax credit of up to 40% (base 33% plus bonuses up to 7% for U.S.-based insurance and classification) on investments in constructing, repowering, or reconstructing qualified cargo vessels built in U.S. shipyards by non-foreign entities of concern. Qualified vessels must be U.S.-flagged, operate in foreign trade for at least 10 years under a Maritime Administration agreement, and meet emergency preparedness requirements. Construction must start before 2033. Includes recapture rules if agreements are violated and allows elective payment or transfer of credits.

Exclusion of Maritime Security Payments from Gross Income (Section 3): Excludes payments under specific U.S. Code sections for maritime security programs (e.g., vessel operating agreements) from taxable income, preventing double benefits like deductions for the same expenses. Applies to taxable years after enactment.

Elimination of 30-Day Domestic Operations Limit (Section 4): Removes restrictions that previously limited qualifying vessels to no more than 30 days of domestic operations per year, allowing more flexibility for U.S. foreign trade vessels.

Expansion of Qualifying Shipping Activities (Section 5): Broadens the definition to include the carriage of goods by sea, aligning with existing maritime laws.

Redefinition of Qualifying Vessel (Section 6): Updates criteria to include self-propelled vessels over 12 feet draft or 6,000 deadweight tons used in foreign trade. Adds "U.S.-owned foreign flag vessels" if owned/controlled by U.S. citizens, managed from the U.S., and meeting security agreements, excluding those from foreign countries of concern.

Shipyard Investment Tax Credit (Section 7): Provides a 25% credit for investments in qualified shipyard facilities (e.g., for building/repairing vessels or manufacturing critical components/equipment). Limited to U.S.-located facilities; ends for property placed in service after 2032. Includes elective payment/transfer options and prevents overlap with vessel credits.

Enhanced Merchant Marine Capital Construction Funds (Section 8): Increases tax-deferred deposits into funds for vessel and cargo handling equipment investments, including income from operations, sales, and depreciation. Qualified withdrawals cover acquisition/construction; prohibits funding for Chinese-made cranes or job-losing automated equipment. Shortens non-qualified withdrawal penalty period from 25 to 15 years. Applies after 2025.

Exemption for Student Incentive Payments (Section 9): Excludes payments under maritime student training agreements from individuals' gross income, starting after 2025.

Maritime Fuel Tax Parity (Section 10): Exempts fuel taxes for vessels engaged in trade between U.S. Atlantic/Pacific ports (including territories), matching exemptions for other qualifying uses. Applies after 2025.

Maritime Prosperity Zones as Opportunity Zones (Section 11): Designates up to 100 census tracts near U.S. shipyards, ports, or harbors as opportunity zones for tax benefits on investments (e.g., capital gains deferrals). Limited to maritime industries (e.g., freight transportation, shipbuilding) under specific NAICS codes. Designations last 5 years, starting at enactment.

Significant Changes to Existing Law

Amends the Internal Revenue Code (e.g., adds Sections 48F and 48G for new credits; modifies Sections 1355, 1356, 7518 for vessel definitions, activities, and funds).
Introduces restrictions on "foreign entities of concern" (e.g., those tied to terrorism, espionage, or adversarial nations like covered nations under defense laws), excluding them from credits and funds.
Expands elective payment/transfer rules (Sections 6417, 6418) to new credits, allowing non-taxable entities (e.g., nonprofits) to monetize benefits.
Aligns with maritime laws (e.g., Title 46 U.S. Code) for security and operations, while terminating some credits by 2032/2033 to encourage timely investments.
Modifies opportunity zone rules (Subchapter Z) to prioritize maritime sectors, changing start dates and eligible industries.

Potential Impacts

Government Agencies: Increases workload for the IRS (administering credits/recapture), Maritime Administration (approvals, designations, consultations with Defense, State, and Intelligence officials), and Coast Guard/Federal Maritime Commission (vessel classifications and security reviews). May boost funding for maritime programs via enhanced domestic capacity.
Citizens and Economy: Creates jobs in shipbuilding, ports, and workforce training; lowers costs for U.S. vessel operators through tax savings, potentially increasing domestic maritime employment and reducing reliance on foreign shipping. Could raise federal revenue short-term via economic growth but reduce it through credits/exemptions.
International Relations: Promotes U.S. maritime self-sufficiency, countering influence from adversarial nations (e.g., bans on Chinese cranes/vessels). May strain trade with restricted countries but strengthen alliances by prioritizing U.S.-flagged fleets in global commerce and defense readiness.

Main Stakeholders Affected

Maritime Industry: Shipbuilders, vessel owners/operators, port authorities, and cargo handlers benefit from credits, exemptions, and funds to modernize fleets and facilities.
Workforce: Maritime workers, students in training programs gain from tax-free incentives and job protections (e.g., against automation).
Taxpayers and Investors: Businesses and individuals investing in qualified activities receive tax relief; opportunity zone designations attract capital to underserved maritime areas.
Government Entities: U.S. Navy, Maritime Administration, and IRS oversee implementation; foreign entities/countries of concern are excluded.
Consumers: Indirectly benefits through more reliable U.S. supply chains for goods transport.

Notable Legal, Constitutional, or Political Implications

Legal: Establishes robust anti-foreign influence measures (e.g., defining "foreign entities of concern" via existing laws like the Espionage Act and sanctions lists), potentially leading to litigation over designations or recapture enforcement. Ensures compliance with maritime treaties by focusing on U.S.-built/owned vessels.
Constitutional: No direct challenges apparent; tax incentives align with Congress's taxing and commerce powers (Article I). Consultations with executive agencies (e.g., Defense, Intelligence) support national security interests without overriding separation of powers.
Political: Bipartisan sponsorship signals broad support for revitalizing U.S. shipbuilding amid geopolitical tensions (e.g., with China). Could influence trade policy by favoring domestic industry, but risks WTO disputes if seen as protectionist. Emphasizes economic nationalism, potentially boosting blue-collar jobs in coastal states.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Sen. Kelly, Mark [D-AZ]

Cosponsors (4)

Sen. Young, Todd [R-IN], Sen. Murkowski, Lisa [R-AK], Sen. Baldwin, Tammy [D-WI], Sen. Fetterman, John [D-PA]

Recent Actions

2025-04-30: Read twice and referred to the Committee on Finance.
2025-04-30: Introduced in Senate

Bill Versions

Building Ships in America Act of 2025 — issued 2025-04-30 — PDF (36 pages)