Congress skips over repeal of Puerto Rico tonnage tax
The proposed repeal of the Puerto Rico trade tonnage tax is a dead issue.
The House and Senate Wednesday passed a version of the 2007 Tax Technical Corrections Act that deleted language repealing the tonnage tax, which had faced stiff opposition from carriers and shippers in the trade.
In addition to the legislation's impact on the Puerto Rico trade, continuation of the tonnage tax option is expected to provide a boost to prospects for the nascent short-sea shipping market.
The tonnage tax language was removed at the committee level by members of the Senate Finance Committee and the House Ways and Means Committee. Last week, interests from the Puerto Rico trade mounted a campaign to stop the proposed change to the existing tax law, which allows ocean carriers to pay a fixed fee based on the size of their vessels and time at sea rather than paying a standard corporate income tax. The tonnage tax has been in effect since 2004 and has lowered the tax burden on the U.S.-flag carriers in the Puerto Rico trade.
Horizon Lines said Thursday that by deleting the provision from a technical corrections act before Congress, carriers between the U.S. mainland and Puerto Rico will be able to continue to pay a much lower tonnage tax rather than corporate income tax on operations between the mainland and the commonwealth.
Horizon said “the impact of the tonnage tax election resulted in a decrease in income tax expense of approximately $43.5 million during 2006” in its annual report to the Securities and Exchange Commission. Other Puerto Rico carriers such as Trailer Bridge and Crowley are also taking advantage of the tonnage tax.
“This progress is in no small part due to the active support of our maritime unions, the US Chamber of Commerce and the government of Puerto Rico,” Horizon said.