ARLINGTON, Va. -- The International Council of Cruise Lines (ICCL) is seeking a waiver from the U.S. Treasury Department that would exempt Carnival Corp. from paying income tax on the three cruise ships it chartered to the Federal Emergency Management Agency (FEMA).

Most cruise lines are exempt from federal income tax because they are classified as foreign corporations involved in the international operation of ships. Carnival Corp., for example, is incorporated in Panama, and its ships are registered in the Bahamas. But a ship that is docked and operating in U.S. waters is no longer engaged in international operation and can be subject to taxes.

The ICCL appealed to the Treasury Department for a waiver for FEMAs chartered vessels, which comprise the Carnival ships as well as the Scotia Prince, a ferry, and for any future ships chartered by FEMA for relief purposes.  

As it relates to taxation, treat these charters as essentially vessels that are operating on international voyages. Dont change the tax status, said Michael Crye, ICCLs president. In essence, thats what were asking.

If [taxes] are waived, then the cost estimates will be reduced, he added. By waiving the taxation, youre reducing the cost of the charters. Its a wash for the government, it reduces the outlay for FEMA and it reduces paperwork for Carnival, Scotia Prince and others in a similar situation.

Carnival and FEMA included a reimbursement for U.S. taxes when it structured the charter arrangement.

The ICCL also requested a waiver from the U.S. Department of Homeland Security that would exempt the chartered ships from fines if they violate the U.S. Passenger Services Act, which prohibits foreign-flagged ships from beginning a voyage in one U.S. port and ending in another before it calls at an international destination; it also asked the government to waive visa restrictions on foreign crew working onboard the docked ships.

There are a number of issues that are involved in taking ships that are normally engaged in international commerce and placing them into service as, essentially, a hotel alongside the dock in the U.S., Crye said.

To contact reporter Rebecca Tobin, send e-mail to [email protected].

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