New Bill Offers Major Tax Breaks for U.S. Shipbuilding and Maritime Ops, Kicking In After 2025

The "Building Ships in America Act of 2025" is on the table, and it’s looking to give the U.S. maritime industry a serious shot in the arm. The core idea? A hefty package of tax incentives and regulatory tweaks designed to get more ships built, repaired, and flagged in the USA. We're talking new tax credits for constructing or upgrading vessels in American shipyards, starting after December 31, 2025, as outlined in Section 2, and similar breaks for investing in the shipyard facilities themselves (Section 7).

Tax Credits Ahoy: What's in the Treasure Chest?

So, what’s the big deal for folks in the shipping and shipbuilding game? First up is the "United States Vessel Investment Credit" (Section 2). If you're building, repowering, or reconstructing a cargo vessel in a U.S. shipyard (and you're not a "foreign entity of concern"), you could snag a tax credit for 33% of your qualified investment. Want more? Get your protection and indemnity insurance from a U.S.-based company, and that’s an extra 5%. Use a U.S.-headquartered classification society like the American Bureau of Shipping for design and classification, and tack on another 2%. That can add up to a 40% credit.

But not just any old boat qualifies. A "qualified vessel" has to be U.S.-flagged, operate in U.S. foreign trade (think international cargo, not cruise ships), be a specific type like a bulk carrier or container ship, and commit to flying the U.S. flag for at least 10 years. Oh, and construction needs to start before January 1, 2033. If you’re just repowering or reconstructing, the vessel must have been originally built in the U.S. There are also requirements for emergency preparedness agreements, basically ensuring these ships can be called upon if Uncle Sam needs them.

Shipyards aren't left out. Section 7 introduces a "shipyard investment tax credit" of 25% for qualified investments in facilities primarily used for constructing or repairing commercial or military oceangoing vessels, or making critical components for them. Think new drydocks, heavy-lift cranes, or advanced welding equipment. This credit is available for property placed in service after December 31, 2025, but sunsets after December 31, 2032. For example, a U.S. shipbuilding company looking to expand its capacity by building a new assembly hall could see a quarter of that investment come back as a tax credit.

An interesting kicker for both these credits: Sections 2 and 7 allow for elective payment and transfer. This means companies, especially those that might not have a huge tax bill to offset, could opt to receive the credit as a direct payment from the government or sell the credit to another taxpayer. This could make these incentives much more accessible.

Beyond the Big Credits: Other Perks and Rule Shuffles

This bill isn't just about shipbuilding credits. It touches several other areas:

• Maritime Security Payments (Sec 3): If your company receives payments under certain maritime security programs (like those under 46 U.S.C. § 53106 for the Maritime Security Fleet), those payments won't count as gross income for tax purposes. That’s a direct boost to the bottom line for participants.
• Domestic Ops Flexibility (Sec 4): The bill scraps the 30-day limitation on domestic operations for certain vessels previously under section 1355 of the Internal Revenue Code. This could give some U.S.-flagged ships in international trade more flexibility to occasionally operate between U.S. ports without penalty.
• Capital Construction Funds (Sec 8): These funds, which allow maritime companies to defer taxes on money set aside for building or acquiring U.S.-built vessels, get some updates. The bill ties deposit limits to specific investment commitments. However, there are new restrictions: you can't use these funds for fully automated cargo handling equipment if it’s deemed to cause job losses at a marine terminal, nor for cranes manufactured in the People's Republic of China.
• Student Incentives (Sec 9): Good news for maritime academy students. Incentive payments received under agreements (like those in 46 U.S.C. § 51509) will be exempt from gross income. This could make a maritime career path more financially attractive for young talent.
• Fuel Tax Parity (Sec 10): Fuel tax exemptions currently available for some vessels are extended to those engaged in trade between U.S. Atlantic or Pacific ports, potentially lowering operating costs for these routes.
• Maritime Prosperity Zones (Sec 11): The bill allows for the designation of up to 100 census tracts as "maritime prosperity zones." These zones, designated for 5-year periods, would be treated like Opportunity Zones, offering tax benefits for investments in specific maritime-related industries (identified by NAICS codes like shipbuilding (3366) and various water transportation services (48311, 483211)). This could spur targeted investment in port areas or regions with shipbuilding potential.

The Fine Print: Who's In, Who's Out, and What's the Catch?

While the bill aims to boost U.S. industry, there are strings attached. A major one is the exclusion of "foreign entities of concern" from benefiting from the vessel investment credit (Section 2). This term is broadly defined and includes entities tied to governments of "foreign countries of concern" – a list that includes covered nations under section 4872 of the tax code but can also be expanded by the Maritime Administrator if they deem a country detrimental to U.S. national security or foreign policy. This broad discretion could create uncertainty for companies with complex international ownership structures or partnerships.

And those juicy vessel tax credits? They come with a 10-year commitment to operate as a U.S. vessel (Section 2). If a company takes the credit and then, say, reflags the vessel to a foreign registry or sells it to an unqualified owner before the 10 years are up, they’ll face a recapture tax – essentially having to pay back 100% of the credit. This is a significant long-term obligation.

The changes to Capital Construction Funds (Section 8) also present a mixed bag. While there's flexibility in deposit rules, the new prohibitions on using funds for certain Chinese-made cranes or automation that displaces workers could impact how ports and shipping companies plan their infrastructure upgrades. For instance, a port authority planning to modernize with the latest automated crane technology might find its funding options limited if that tech is sourced from China or if it's projected to reduce certain jobs, forcing them to seek potentially more expensive or less advanced alternatives.

The Maritime Prosperity Zones (Section 11) are also targeted. Only 100 tracts can be designated, and eligibility for the special tax treatment is limited to businesses in specific maritime NAICS codes. This means some communities or related support industries might not see the benefits. The designation process itself, involving nomination by the Maritime Administrator and certification by the Secretary, will be crucial in determining where these zones are located and who ultimately benefits.

Overall, the Building Ships in America Act of 2025 lays out a comprehensive strategy to revitalize the U.S. maritime sector. The tax incentives are substantial, but so are the commitments and restrictions, particularly concerning foreign influence and long-term operational requirements. For businesses in the maritime world, it’s a bill that will require careful navigation of its many provisions once it potentially moves forward.