50 Cfr 259

50 CFR Part 259 (up to date as of 4/19/2022)
Capital Construction Fund Tax Regulations

50 CFR Part 259

This content is from the eCFR and is authoritative but unofficial.

Title 50 - Wildlife and Fisheries
Chapter II - National Marine Fisheries Service, National Oceanic and Atmospheric
Administration, Department of Commerce
Subchapter F - Aid to Fisheries
Part 259 Capital Construction Fund Tax Regulations
§ 259.1 Definitions.
§ 259.2 Applying for a Capital Construction Fund Agreement (“Agreement”).
§ 259.3 Acquisition, construction, or reconstruction.
§ 259.4 Constructive deposits and withdrawals; ratification of withdrawals (as qualified) made
without first having obtained Secretary's consent; first tax year for which an Agreement is
effective.
§ 259.5 Maximum deposit amounts and time to deposit.
§ 259.6 Termination of inactive and zero balance accounts.
§ 259.7 Annual deposit and withdrawal reports required.
§ 259.8 CCF accounts.
§ 259.9 Conditional consents to withdrawal qualification.
§ 259.10 Miscellaneous.

PART 259 - CAPITAL CONSTRUCTION FUND TAX REGULATIONS
Authority: 46 U.S.C. 53501, formerly 46 U.S.C. App. 1177 and 1177-1.
Source: 82 FR 24565, May 30, 2017, unless otherwise noted.

§ 259.1 Definitions.
As used in this part:
Act

means Chapter 535 of Title 46 of the U.S. Code (46 U.S.C. 53501-53517), as may be amended from time
to time.

Agreement means the contract to participate in the program between the approved CCF applicant (party) and
the Secretary.
Agreement vessel means any eligible vessel or qualified vessel which is subject to an Agreement.
Citizen of the United States means any person who is a United States citizen and any corporation or
partnership organized under the laws of any state which meets the requirements for documenting vessels
in the U.S. coastwise trade.
Commercial fishing means fishing in which the fish harvested, either in whole or in part, are intended to enter
commerce or enter commerce through sale, barter or trade.
Depository means the bank or brokerage account(s) listed in the Agreement where the CCF funds will be
physically held.
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Capital Construction Fund Tax Regulations

50 CFR 259.1

Eligible vessel means (1)

A vessel (i)

(ii)
(iii)
(2)

Constructed in the United States (and, if reconstructed, reconstructed in the United States),
constructed outside of the United States but documented under the laws of the United States
on April 15, 1970, or constructed outside the United States for use in the United States foreign
trade pursuant to a contract made before April 15, 1970;
Documented under the laws of the United States if 5 net tons or greater; and
Operated in the foreign or domestic commerce of the United States or in the fisheries of the
United States; and

A commercial fishing vessel or vessel which will carry fishing parties for hire (i)
(ii)

Constructed in the United States and, if reconstructed, reconstructed in the United States;
State registered if at least 2 net tons but fewer than 5 net tons or Documented under the laws
of the United States if 5 net tons or greater;

(iii)

Owned by a citizen of the United States;

(iv)

Having its home port in the United States; and

(v)

Operated in the commercial fisheries of the United States.

Extension period means the first day following the end of the Filing period and ending on the last day of the
party's last filing extension.
Filing period means the first day following the end of the Tax Year and ending on the party's last day to file their
tax return absent a filing extension.
Limited Access System means a system that limits participation in a fishery to those satisfying certain
eligibility criteria or requirements contained in a fishery management plan or associated regulation.
Qualified vessel means (1)

A vessel (i)

(ii)
(iii)
(2)

Constructed in the United States (and, if reconstructed, reconstructed in the United States),
constructed outside of the United States but documented under the laws of the United States
on April 15, 1970, or constructed outside the United States for use in the United States foreign
trade pursuant to a contract made before April 15, 1970;
Documented under the laws of the United States if 5 net tons or greater; and
Agreed, between the Secretary and the person maintaining the capital construction fund
established under 46 U.S.C. 53503, to be operated in the fisheries of the United States; and

A commercial fishing vessel or vessel which will carry fishing parties for hire (i)
(ii)
(iii)

Constructed in the United States and, if reconstructed, reconstructed in the United States;
State registered if at least 2 net tons but fewer than 5 net tons or Documented under the laws
of the United States if 5 net tons or greater;
Owned by a citizen of the United States;

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(3)

(iv)

Having its home port in the United States; and

(v)

Operated in the commercial fisheries of the United States; and

50 CFR 259.1

Gear which is permanently fixed to the vessel. The expenditure for gear and certain nets which are
not fixed to the vessel (pots, traps, longline, seine nets, gill set nets and gill drift nets) is excluded
from the amount eligible for qualified withdrawals of CCF funds.

Schedule A means the section of the Agreement that designates the income producing vessel from which
deposits are made to a designated account.
Schedule B means the section of the Agreement that designates the qualified project for which the CCF funds
are to be expended.
Secretary means the Secretary of Commerce with respect to eligible or qualified vessels operated or to be
operated in the fisheries of the United States.
Tax due date means the date the party's Federal tax return must be filed, including extensions, with the Internal
Revenue Service.
Tax year means the period between January 1 and December 31 for Calendar year filers or the designated
fiscal year for fiscal year filers.
United States means the United States of America and, for citizenship purposes, includes the Commonwealth
of Puerto Rico, American Samoa, Guam, the U.S. Virgin Islands, the Republic of the Marshall Islands, the
Federated States of Micronesia, the Commonwealth of the Northern Mariana Islands, and any other
commonwealth, territory, or possession of the United States, or any political subdivision of any of them.

§ 259.2 Applying for a Capital Construction Fund Agreement (“Agreement”).
(a)

(b)

General qualifications. To be eligible to enter into an Agreement an applicant must:
(1)

Be a citizen of the United States (citizenship requirements are those necessary for documenting
vessels in the coastwise trade within the meaning of section 2 of the Shipping Act, 1916, as
amended);

(2)

Own or lease one or more eligible vessels (as defined at 46 U.S.C. 53501) operating in the foreign
or domestic commerce of the United States;

(3)

Have an acceptable plan to acquire, construct, or reconstruct one or more qualified vessels (as
defined at 46 U.S.C. 53501). The plan must be a firm representation of the applicant's actual
intentions. Qualified vessels must be for commercial operation in the fisheries of the United States.
If the vessel is 5 net tons or over, it must be documented with a fishery trade endorsement. Dual
documentation in both the fisheries and the coastwise trade of the United States is permissible. Any
vessel which will carry fishing parties for hire must be inspected and certified (under 46 CFR part
176) by the U.S. Coast Guard as qualified to carry more than six passengers. If the vessel weighs
fewer than 5 net tons the party must demonstrate to the Secretary's satisfaction that the carrying of
fishing parties for hire will constitute its primary activity.

Content of application. Applicants seeking an Agreement must submit a formal application providing the
following information:
(1)

Name and Tax Identification Number (TIN) of applicant;

(2)

Proof of U.S. citizenship;

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50 CFR 259.2(b)(3)

(3)

The first taxable year for which the Agreement is to apply (see § 259.4 for the latest time at which
applications for an Agreement relating to the previous taxable year may be received);

(4)

The following information regarding each eligible vessel which is to be incorporated in Schedule A
of the Agreement:
(i)

Name of vessel,

(ii)

Official number or, in the case of vessels weighing under 5 net tons, the State registration
number, where required,

(iii)

Type of vessel (i.e., catching vessel, processing vessel, transporting vessel, charter vessel,
barge, passenger carrying fishing vessel, etc.),

(iv)

General characteristics (i.e., net tonnage, fish-carrying capacity, age, length, type of fishing
gear, number of passengers carried or in the case of vessels operating in the foreign or
domestic commerce the various uses of the vessel, etc.),

(v)

Whether it is owned or leased and, if leased, the name of the owner, and a copy of the lease,

(vi)

Date and place of construction,

(vii)

If reconstructed, date of redelivery and place of reconstruction,

(viii) Trade (or trades) in which the vessel is documented and date last documented,

(5)

(ix)

The fishery of operation (which in this section means each species or group of species). Each
species must be specifically identified by the acceptable common names of fish, shellfish, or
other living marine resources which each vessel catches, processes, or transports or will catch,
process, or transport for commercial purposes such as marketing or processing the catch),

(x)

The area of operation (which for fishing vessels means the general geographic areas in which
each vessel will catch, process, or transport, or charter for each species or group of species of
fish, shellfish, or other living marine resources),

The specific objectives to be achieved by the accumulation of assets in a Capital Construction
Fund (to be incorporated in Schedule B of the Agreement) including:
(i)

Number of vessels,

(ii)

Type of vessel (i.e., catching, processing, transporting, or passenger carrying fishing vessels),

(iii)
(iv)
(v)

(vi)

General characteristics (i.e., net tonnage, fish-carrying capacity, age, length, type of fishing
gear, number of passengers carried),
Cost of projects,
Amount of indebtedness to be paid for vessels to be constructed, acquired, or reconstructed
(all notes, mortgages, or other evidence of indebtedness must be submitted as soon as
available, together with sufficient additional evidence to establish that full proceeds of the
indebtedness to be paid from a CCF account under an Agreement, were used solely for the
purpose of the construction, acquisition, or reconstruction of Schedule B vessels),
Date of construction, acquisition, or reconstruction,

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(vii)

50 CFR 259.2(b)(5)(vii)

Fishery of operation (which in this section means each species or group of species must be
specifically identified by acceptable common name of fish, shellfish, or other living marine
resources), and

(viii) Area of operation (which in this section means the general geographic areas in which each
vessel will operate for each species or group of species of fish, shellfish, or other living marine
resources),
(c)

Filing. The application must be signed and submitted to the Financial Services Division of the National
Marine Fisheries Service. As a general rule, the Agreement must be executed and entered into by the
taxpayer on or prior to the due date for the filing of the Federal tax return in order to be effective for the
tax year to which that return relates. It is in the Applicant's best interest to file at least 45 days in advance
of such date.

§ 259.3 Acquisition, construction, or reconstruction.
CCF funds cannot be used for any vessel acquisition, construction, or reconstruction that increases harvesting
capacity in a fishery or fisheries, other than in a limited access system in which the fisheries management authority
establishes harvesting limits.
(a)

Acquisition. CCF funds can be used to acquire any used qualified vessel that will fish in a limited access
system in which the fisheries management authority establishes harvesting limits. If the fishery or
fisheries is not a limited access system, CCF funds can only be used to replace an existing, recently
sunken, or scrapped vessel and its existing harvesting capacity. The replaced vessel must lose its
fisheries trade endorsement and the vessel owner must notify the Coast Guard Documentation Center of
that fact.

(b)

Construction. CCF funds can be used to construct a new qualified vessel that will fish in a limited access
system in which the fisheries management authority establishes harvesting limits. If the fishery or
fisheries is not a limited access system, CCF funds can only be used to replace an existing, recently
sunken, or scrapped vessel and its existing harvesting capacity. The replaced vessel must lose its
fisheries trade endorsement and the vessel owner must notify the Coast Guard Documentation Center of
that fact.

(c)

Reconstruction. Reconstruction may include rebuilding, replacing, reconditioning, refurbishing, repairing,
converting and/or improving any portion of a vessel. A reconstruction project must, however, either
substantially prolong the useful life of the reconstructed vessel, increase its value, materially increase its
safety, reliability, or energy efficiency, or adapt it to a different commercial use in the fishing trade or
industry. No vessel more than 25 years old at the time of withdrawal shall be a qualified vessel for the
purpose of reconstruction unless a special showing is made, to the Secretary's discretionary satisfaction,
that the type and degree of reconstruction intended will result in an efficient and productive vessel with an
economically useful life of at least 10 years beyond the date reconstruction is completed.

(d)

Time permitted for construction or reconstruction. Construction or reconstruction must be completed
within 18 months from the date construction or reconstruction first commences, unless otherwise
consented to by the Secretary.

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50 CFR 259.4

§ 259.4 Constructive deposits and withdrawals; ratification of withdrawals (as qualified) made
without first having obtained Secretary's consent; first tax year for which an Agreement is
effective.
(a)

Constructive deposits and withdrawals (before Agreement executed date ). Constructive deposits and
withdrawals are deemed to have been deposited to and withdrawn from a designated CCF account even
though the funds were not physically deposited. Constructive deposits and withdrawals shall be
permissible only during the “Tax Year” for which a written application for an Agreement is submitted to
the Secretary. Once the Secretary executes the Agreement, the constructive deposit and withdrawal
period ends. All deposits must be physically deposited into a designated CCF account.
(1)

(2)

All qualified deposits and expenditures occurring within the period specified directly above, that are
within the eligible ceilings specified at 46 U.S.C. 53505, may be consented to by the Secretary as
constructive deposits and withdrawals. In order for the Secretary to provide his or her consent for
constructive deposit and withdrawal treatment, the applicant must include a written request with the
application and provide sufficient supporting data to enable the Secretary to evaluate the request.
This written request must be submitted no later than the “Extension Period” for that party's initial tax
year.
[Reserved]

(b)

Constructive deposits and withdrawals (after the Agreement effective date ). The Secretary shall not
permit constructive deposits or withdrawals after the effective date of an Agreement. Deposits made
after the effective date of an Agreement must be physically deposited into a dedicated CCF account.

(c)

First tax year for which an Agreement is effective. In order for an Agreement to be effective for any
applicant's “Tax Year,” the written application must be submitted to the Secretary before the end of the
“Filing Period” or “Extension Period” for that tax year, whichever applies. If the written application is
received by the Secretary, after the end of the “Filing Period” or “Extension Period,” whichever applies, then
the Agreement will be first effective for the next succeeding “Tax Year.”
(1)

(2)
(d)

It is in the applicant's best interest to submit his or her written application at least 45 days in
advance of the end of his or her tax due date. If the written application is submitted too close to the
tax due date, and the Secretary is not ultimately able to execute the Agreement, the applicant must
bear the burden of negotiating with the Internal Revenue Service for relief. The Secretary shall regard
any penalties related to this denied application as due to the applicant's failure to apply for an
Agreement in a timely manner.
[Reserved]

Ratification of withdrawals, as qualified, made without first having obtained Secretary's prior consent. Any
withdrawals made after the effective date of an Agreement without the Secretary's consent are
automatically non-qualified withdrawals, unless the Secretary subsequently consents to them by
ratification.
(1)

The Secretary may ratify, as qualified, any withdrawal made without the Secretary's prior consent,
provided the withdrawal would have resulted in the Secretary's consent had it been requested before
withdrawal.

(2)

The Secretary may issue his or her retroactive consent, if appropriate, as work priorities permit.
However, if the Secretary is unable to issue retroactive consent for withdrawals made without his or
her consent, then those withdrawals, and any associated penalties, will be deemed due to the party's
failure to apply in a timely manner.

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50 CFR 259.4(d)(3)

(3)

It is recommended that a party submit his or her request for withdrawal at least 45 days in advance
of the expected date of withdrawal. Withdrawals made without the Secretary's consent, in reliance
on obtaining the Secretary's consent, are made purely at a party's own risk. Should any withdrawal
made without the Secretary's consent prove, for any reason, to be one which the Secretary will not or
cannot consent to ratify, then the result will be an unqualified withdrawal and/or an involuntary
termination of the Agreement.

(4)

Should a party withdraw CCF funds for a project not previously deemed an eligible Schedule B
objective without having first obtained the Secretary's consent, the Secretary may entertain an
application to amend the Agreement's Schedule B objectives as the prerequisite to consenting by
ratification to the withdrawal.

(5)

Redeposit of any withdrawals made without the Secretary's consent, and for which such consent is
not subsequently given (either by ratification or otherwise), shall not be permitted. If the nonqualified withdrawal adversely affects the Agreement's general status the Secretary may terminate
the Agreement.

§ 259.5 Maximum deposit amounts and time to deposit.
(a)

Other than the maximum annual ceilings established by the Act, the Secretary shall not establish an
annual ceiling. However, deposits can no longer be made once a party has deposited 100 percent of the
anticipated cost of all Schedule B objectives unless the Agreement is then amended to establish
additional Schedule B objectives.

(b)

Ordinarily, the Secretary shall permit deposits to accumulate prior to commencement of any given
Schedule B objective for a maximum of ten years. However, at the Secretary's sole discretion and based
on good and sufficient cause shown, the time period may be extended.

§ 259.6 Termination of inactive and zero balance accounts.
(a)

If a Schedule B objective has not commenced within 10 years from the date the Agreement was
established, and has not been extended by written approval of the Secretary, the Agreement is considered
inactive and subject to termination.

(b)

If the account balance of all depositories of an Agreement is zero dollars 10 years after the date it was
established, and has not been extended through amendment, the Agreement is considered inactive and
subject to termination unless its Schedule B objective has commenced.

(c)

A certified letter will be sent to holders of Agreements identified for termination informing them that the
agreement will terminate 60 days after the date of the letter unless the deficiencies identified in the letter
are addressed.

§ 259.7 Annual deposit and withdrawal reports required.
(a)

The Secretary will require from each party an annual deposit and withdrawal report for each CCF
depository. Failure to submit such reports may be cause for involuntary termination of the party's
Agreement.
(1)

A final deposit and withdrawal report at the end of the tax year, which shall be submitted not later
than 30 days after expiration of the due date, for filing the party's Federal income tax return. The
report must be made on a form prescribed by the Secretary using a separate form for each CCF
depository.

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(2)

50 CFR 259.7(a)(2)

Each report must bear a certification that the deposit and withdrawal information given includes all
annual deposit and withdrawal activity for each CCF depository. Negative reports must be submitted
in those cases where there is no deposit and/or withdrawal activity.

(b)

The Secretary, at his or her discretion, may, after due notice, disqualify withdrawals and/or involuntarily
terminate the Agreement for the participant's failure to submit the required annual deposit and withdrawal
reports.

(c)

Additionally, each party shall submit, not later than 30 days after expiration of the party's tax due date, a
copy of the party's Federal Income Tax Return filed with IRS for the preceding tax year. Failure to submit
the Federal Income Tax Return shall, after due notice, be cause for the same adverse action specified in
paragraph (b) of this section.

§ 259.8 CCF accounts.
(a)

General. Each CCF account in a scheduled depository shall have an account number, which must be
reflected on the reports required by § 259.7. All CCF accounts shall be reserved only for CCF transactions.
There shall be no intermingling of CCF and non-CCF transactions and there shall be no pooling of 2 or
more CCF accounts without the prior consent of the Secretary. Safe deposit boxes, safes, or the like shall
not be eligible CCF depositories without the Secretary's consent, which shall be granted solely at his or
her discretion.

(b)

Assignment. The use of funds held in a CCF depository for transactions in the nature of a countervailing
balance, compensating balance, pledge, assignment, or similar security arrangement shall constitute a
material breach of the Agreement unless prior written consent of the Secretary is obtained.

(c)

Depositories. Section 53506(a) of the Act provides that amounts in a CCF account must be kept in a
depository or depositories specified in the Agreements and be subject to such trustee or other fiduciary
requirements as the Secretary may require. Unless otherwise specified in the Agreement, the party may
select the type or types of accounts in which the assets of the Fund may be deposited.

§ 259.9 Conditional consents to withdrawal qualification.
The Secretary may conditionally consent to the qualification of a withdrawal. This consent is conditioned upon the
timely submission, to the Secretary, of the items requested by the Secretary in the withdrawal approval letter. Failure
to provide these items in a timely manner, and after due notice, will result in nonqualification of the withdrawal and/
or involuntary termination of the Agreement.

§ 259.10 Miscellaneous.
(a)

Wherever the Secretary prescribes time constraints, the postmark date shall control if mailed. If a private
delivery service is used, including Federal Express or United Parcel Service, the date listed on the label
shall control. Submission of CCF transactions by email or facsimile is only allowable when an original
signature is not required.

(b)

All CCF information received by the Secretary shall be held strictly confidential to the extent permitted by
law, except that it may be published or disclosed in statistical form provided such publication does not
disclose, directly or indirectly, the identity of the fund holder.

(c)

While recognizing that precise regulations are necessary in order to treat similarly situated parties
similarly, the Secretary also realizes that precision in regulations can sometimes cause inequitable effects
to result from unavoidable, unintended, or minor discrepancies between the regulations and the
circumstances they attempt to govern. The Secretary will, consequently, at his or her discretion, as a

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50 CFR 259.10(d)

matter of privilege and not as a matter of right, attempt to afford relief to parties where literal application
of the purely procedural, as opposed to substantive, aspects of these regulations would otherwise work
an inequitable hardship. This privilege will be sparingly granted and no party should act in reliance on its
being granted.
(d)

These §§ 259.1 through 259.10 are applicable to all Agreements first entered into (or amended) on or
after the date these sections are adopted.

(e)

These §§ 259.1 through 259.10 are specifically incorporated in all Agreements existing prior to the date
these sections are adopted.

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