[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 774 Introduced in Senate (IS)]
108th CONGRESS
1st Session
S. 774
To amend the Internal Revenue Code of 1986 to allow the use of
completed contract method of accounting in the case of certain long-
term naval vessel construction contracts.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 3, 2003
Ms. Snowe introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to allow the use of
completed contract method of accounting in the case of certain long-
term naval vessel construction contracts.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. MODIFICATION OF ACCOUNTING RULES FOR CERTAIN NAVAL LONG-TERM
CONSTRUCTION CONTRACTS.
(a) In General.--Section 460(e)(1) of the Internal Revenue Code of
1986 (relating to exception for certain construction contracts) is
amended by striking ``or'' at the end of subparagraph (A), by striking
the period at the end of subparagraph (B) and inserting ``, or'', and
by inserting after subparagraph (B) the following new subparagraph:
``(C) a qualified naval construction contract for
which an election is made under paragraph (7).''.
(b) Qualified Naval Construction Contract.--Section 460(e) of the
Internal Revenue Code of 1986 is amended by adding at the end the
following new paragraph:
``(7) Qualified naval construction contract.--
``(A) In general.--A taxpayer who owns and operates
a shipyard may elect to use the completed contract
method of accounting with respect to any qualified
naval construction contract for the building,
construction, reconstruction, or rehabilitation of a
naval vessel at such shipyard.
``(B) Definitions and special rules.--
``(i) Qualified naval construction
contract.--For purposes of this subsection, the
term `qualified naval construction contract'
means a contract--
``(I) entered into by the taxpayer
with the Federal Government for the
building, construction, reconstruction,
or rehabilitation of a naval vessel,
and
``(II) which the taxpayer estimates
(at the time such contract is entered
into) will be completed more than 24
months after the contract commencement
date of such contract.
``(ii) Naval vessel.--For purposes of this
paragraph, the term `naval vessel' means any
vessel intended to be navigated in, on, or
under the water.
``(iii) Completed.--For purposes of this
paragraph, a contract shall be treated as
completed upon the issuance of a letter of
acceptance or similar document by the Federal
Government.
``(iv) Entering contracts.--For purposes of
clause (i), a taxpayer shall be treated as
entering into a contract with the Federal
Government if the taxpayer is specified in the
bid for such contract as being a member of a
team (for purposes of performing the work under
such contract) that includes the person who
entered into such contract.
``(C) Effect of election.--An election under this
paragraph shall apply to all contracts of the taxpayer
which are entered into during the taxable year in which
the election is made or any subsequent taxable year.
``(D) Separate contract.--For purposes of applying
this paragraph, in the case of a qualified naval
construction contract which covers more than 1 vessel,
each vessel covered by the contract shall be treated as
a separate contract for the purpose of applying the
completed contract method, and the gross contract price
and the total contract costs shall be allocated to each
separate vessel contract in accordance with regulations
prescribed by the Secretary.
``(E) Earnings and profits.--Section 312(n)(6)
shall not apply to a taxpayer which has made an
election under this paragraph with respect to a
qualified naval construction contract.''.
(c) Effective Date.--The amendments made by this section shall
apply with respect to contracts entered into before, on, or after the
date of the enactment of this Act and completed (within the meaning of
section 460(e)(7)(B)(iii) of the Internal Revenue Code of 1986, as
added by this section) after such date.
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