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[PUBLIC—No. 562—70th CONGRESS]

[H. R. 1]

An Act To reduce and equalize taxation, provide revenue, and for other purposes.

SEC. 707. INCOME TAX ON SALE OF VESSELS BUILT BEFORE 1914.

The second paragraph of section 23 of the Merchant Marine Act, 1920, is amended, to take effect as of June 5, 1920, to read as follows:

During the period of ten years from June 5, 1920, any person, a citizen of the United States, may sell a vessel documented under the laws of the United States and built prior to January 1, 1914, shall be exempt from all income taxes that would be payable upon any of the proceeds of such sale under the Revenue Act of 1918, or under any subsequent Revenue Act in force during such ten-year period, if the entire proceeds thereof shall be invested in the building of new ships in American shipyards, such ships to be documented under the laws of the United States and to be of a type approved by the board. The basis of any such new ship shall be reduced by the amount of the gain from such sale exempt from taxation under this paragraph.”

Approved, May 29, 1928.

(8. 744) An Act To further develop an American merchant marine, to Assure its permanence in the transportation of the foreign trade of the United States, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

TITLE I-DECLARATION OF POLICY

Sec. 1. The policy and the primary purpose declared in section 1 of the Merchant Marine Act, 1920 (U. S. C., Title 46, 8 861], are hereby confirmed.

TITLE II-SHIPPING BOARD VESSELS

SALES BY BOARD

Sec. 201. The United States Shipping Board shall not sell any vessel or any line of vessels except when in its judgment the building up and maintenance of an adequate merchant marine can be best served thereby, and then only upon the affirmative vote of five members of the board duly recorded.

REMODELING AND IMPROVING

Sec. 202. In addition to its power to recondition and repair vessels under section 12 of the Merchant Marine Act, 1920, as amended [U. S. C., Title 46, § 871), the board may remodel and improve vessels owned by the United States and in its possession or under its control, so as to equip them adequately for competition in the foreign trade of the United States. Any vessel so remodeled or improved shall be documented under the laws of the United States and shall remain documented under such laws for not less than five years from the date of the completion of the remodeling or improving and so long as there remains due the United States any money or interest on account of such vessel, and during such period it shall be operated only on voyages which are not exclusively coastwise.

REPLACEMENTS

SEC. 203. The necessity for the replacement of vessels owned by the United States and in the possession or under the control of the board and the construction for the board of additional up-to-date cargo, combination cargo and passenger, and passenger ships, to give ,

, the United States an adequate merchant marine, is hereby recognized, and the board is authorized and directed to present to Congress from time to time, recommendations setting forth what new vessels aro required for permanent operation under the United States flag in foreigņ trade, and the estimated cost thereof, to the end that Congress may, from time to time, make provision for replacements and additions. All vessels built for the board shall be built in the United States, and they shall be planned with reference to their possible usefulness as auxiliaries to the naval and military services of the United States.

TITLE III-CONSTRUCTION LOAN FUND

TERMS AND CONDITIONS OF LOANS

SEO. 801. (a) Section 11 of the Merchant Marine Act, 1920, as amended (U. S. C., Title 46, 8 870; 44 Statutes at Large, pt. 2, 1451), is amended to read as follows:

“ Sec. 11. (a). That the board may set aside, out of the revenues from sales, including proceeds of securities consisting of notes, letters of credit, or other evidences of debt, taken by it for deferred payments on purchase money from sales by the board, whether such securities are to the order of the United States, the United States Shipping Board, the United States Shipping Board Emergency Fleet Corporation, or the United States Shipping Board Merchant Fleet Corporation, either directly or by indorsement, until the amounts thus set aside from time to time aggregate $125,000,000. The amount thus set aside shall be known as the construction loan fund. The board may use such fund to the extent it thinks proper, upon such terms as the board may prescribe, in making loans to aid persons citizens of the United States in the construction by them in private shipyards or navy yards in the United States of vessels of the best and most efficient type for the establishment or maintenance of service on lines deemed desirable or necessary by the board, provided such vessels shall be fitted and equipped with the most modern, the most efficient, and the most economical engines, machinery, and commercial appliances; or in the outfitting and equipment by them in private shipyards or navy yards in the United States of vessels already built, with engines, machinery, and commercial appliances of the type and kind mentioned; or in the reconditioning, remodeling, or improvement by them in private shipyards or navy yards in the United States of vessels already built.

"(b) The term ' vessel' or 'vessels', where used in this section, shall be construed to mean a vessel or vessels to aid in whose construction, equipment, reconditioning, remodeling, or improvement, a loan is made from the construction loan fund of the board. All such vessels shall be documented under the laws of the United States and shall remain documented under such laws for not less than twenty years from the date the loan is made, and so long as there remains due the United States any principal or interest on account of such loan.

"(c) No loan shall be made for a longer time than twenty years. If it is not to be repaid within two years from the date when the first advance on the loan is made by the board, the principal shall be payable in equal annual installments to be definitely prescribed in the instruments. The loan may be paid at any time, on thirty days' written notice to the board, with interest computed to date of payment.

"(d) All such loans shall bear interest at rates as follows, payable not less frequently than annually: During any period in which the vessel is operated exclusively in coastwise trade, or is inactive, the rate of interest shall be as fixed by the board, but not less than 544 per centum per annum. During any period in which the vessel is operated in foreign trade the rate shall be the lowest rate of yield (to the nearest one-eighth of 1 per centum) of any Government obligation bearing a date of issue subsequent to April 6, 1917 (except postal-savings bonds), and outstanding at the time the loan is made by the board, as certified by the Secretary of the Treasury to the board upon its request. The board may prescribe rules for determining the amount of interest payable under the provisions of this paragraph.

(e) No loan shall be for a greater sum than three-fourths the cost of the vessel or vessels to be constructed or than three-fourths the cost of the reconditioning, remodeling, improving, or equipping hereinbefore authorized for a vessel already built.

“(f) The board shall require such security as it shall deem necessary to insure the completion of the construction, reconditioning, remodeling, improving, or equipping of the vessel within a reasonable time and the repayment of the loan with interest; when the construction, reconditioning, remodeling, improving, or equipping of the vessel is completed the security shall include a preferred mortgage on the vessel, complying with the provisions of the Ship Mortgage Act, 1920 [U. S. C., Title 46, Chap. 25), which mortgage shall contain appropriate covenants and provisions to insure the proper physical maintenance of the vessel, and its protection against liens for taxes, penalties, claims, or liabilities of any kind whatever, which might impair the security for the debt. It shall also contain any other covenants and provisions the board may prescribe, including a provision for the summary maturing of the entire debt, for causes to be enumerated in the mortgage.

"(g) The board shall also require and the security furnished shall provide that the owner of the vessel shall keep the same insured against loss or damage by fire, and against marine risks and disasters, and against any and all other insurable risks the board specifies, with such insurance companies, associations, or underwriters, and under such forms of policies, and to such an amount, as the board may prescribe or approve; such insurance shall be made payable to the board and/or to the parties, as interest may appear. The board is authorized to enter into any agreement that it deems wise in respect to the payment and for the guaranty of premiums of insurance."

(b) Section 11 of the Merchant Marine Act, 1920, as in force immediately prior to the enactment of this Act, shall remain in force in respect of all loans made before the enactment of this Act.

IN OREASE OF CONSTRUCTION LOAN FUND

Sec. 802. (a) There is authorized to be appropriated, to be credited to and for the purposes of the construction loan fund created by section 11 of the Merchant Marine Act, 1920, as amended, such amounts as will, when added to the amounts credited to such fund by the United States Shipping Board under authority of law (exclusive of repayments on loans from the fund), make the aggrogate of the amounts credited to such fund (exclusive of such repayments) equal to $250,000,000.

(b) When $250,000,000 has been credited to such fund (whether by the board under authority of law or from appropriations authorized by this section, but exclusive of repayments on loans from the fund) then no further sums (except such repayments) shall be credited by the board to such fund.

(c) The construction loan fund shall continue to be a revolving fund. Repayments on loans from the fund shall be credited to the fund, but interest on such loans shall be covered into the Treasury as miscellaneous receipts.

TITLE IV.-OCEAN MAIL SERVICE

SCOPE OF TITLE

SEC. 401. All mails of the United States carried on vessels between ports (exclusive of ports in the Dominion of Canada other than ports in Nova Scotia) between which it is lawful under the navigation laws for a vessel not documented under the laws of the United States to carry merchandise shall, if practicable, be carried on vessels in respect of which a contract is made under this title.

· REQUIREMENTS OF POSTAL SERVICE

SEO. 402. As soon as practicable after the enactment of this Act, and from time to time thereafter, it shall be the duty of the Postmaster General to certify to the United States Shipping Board what ocean mail routes, in his opinion, should be established and/or operated for the carrying of mails of the United States between ports (exclusive of ports in the Dominion of Canada other than ports in Nova Scotia) between which it is lawful under the navi. gation laws for a vessel not documented under the laws of the United States to carry merchandise, distributed so as equitably to serve the Atlantic, Mexican Gulf, and Pacific coast ports, the volume of mail then moving over such routes and the estimated volume thereof during the next five years, the times deemed by him advisable for the departure of the vessels carrying such mails, and other requirements necessary to provide an adequate postal service between such ports.

RECOMMENDATIONS BY SHIPPING BOARD Sec. 403. The board shall, as soon as practicable after receipt of such certification from the Postmaster General, determine and certify to him the type, size, speed, and other characteristics of the vessels which should be employed on each such route, the frequency and regularity of their sailings, and all other facts which bear upon the capacity of the vessels to meet the requirements of the service stated by the Postmaster General. The board in making its determination shall take into consideration the desirability of having the mail service performed by vessels constructed in accordance with the latest and most approved types, with modern improvements and appliances

62555 0-60-8

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