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Title 26, Internal Revenue CodeRelease 119-110

§1353 Notional Shipping Income

Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter R — Election To Determine Corporate Tax on Certain International Shipping Activities Using Per Ton Rate › § 1353

Last updated Sep 22, 2026|Official source

Summary

A company that opts into this rule figures its notional shipping income by adding an amount for each qualifying ship it operates. For each ship, multiply a daily notional rate by the number of days the ship worked in United States foreign trade during the tax year. The daily rate is 40 cents for each 100 tons of net tonnage up to 25,000 net tons, and 20 cents for each 100 tons above 25,000 net tons. If some of a ship’s income is not included in taxable income because of section 883 or other rules, the notional amount for that ship is reduced in proportion to how much of the ship’s income is actually taxable versus excluded. If two or more people operate the same ship at the same time, the notional income for that period is split among them based on their ownership, charter, and operating shares or other rules the Treasury sets.

Full Legal Text

Title 26, §1353

Internal Revenue Code, Source: USLM XML via OLRC

(a)In general
For purposes of this subchapter, the notional shipping income of an electing corporation shall be the sum of the amounts determined under subsection (b) for each qualifying vessel operated by such electing corporation.
(b)Amounts
(1)In general
For purposes of subsection (a), the amount of notional shipping income of an electing corporation for each qualifying vessel for the taxable year shall equal the product of— (A)
(B)the number of days during the taxable year that the electing corporation operated such vessel as a qualifying vessel in United States foreign trade.
(2)Treatment of vessels the income from which is not otherwise subject to tax
In the case of a qualifying vessel any of the income from which is not included in gross income by reason of section 883 or otherwise, the amount of notional shipping income from such vessel for the taxable year shall be the amount which bears the same ratio to such shipping income (determined without regard to this paragraph) as the gross income from the operation of such vessel in the United States foreign trade bears to the sum of such gross income and the income so excluded.
(c)Daily notional shipping income
For purposes of subsection (b), the daily notional shipping income from the operation of a qualifying vessel is—
(1)40 cents for each 100 tons of so much of the net tonnage of the vessel as does not exceed 25,000 net tons, and
(2)20 cents for each 100 tons of so much of the net tonnage of the vessel as exceeds 25,000 net tons.
(d)Multiple operators of vessel
If for any period 2 or more persons are operators of a qualifying vessel, the notional shipping income from the operation of such vessel for such period shall be allocated among such persons on the basis of their respective ownership, charter, and operating agreement interests in such vessel or on such other basis as the Secretary may prescribe by regulations.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

2005—Subsec. (d). Pub. L. 109–135 substituted “ownership, charter, and operating agreement interests” for “ownership and charter interests”.

Statutory Notes and Related Subsidiaries

Effective Date

of 2005 AmendmentAmendment by Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.

Effective Date

Section applicable to taxable years beginning after Oct. 22, 2004, see section 248(c) of Pub. L. 108–357, set out as an

Effective Date

of 2004

Amendments

note under section 56 of this title.

Reference

Citations & Metadata

Citation

26 U.S.C. § 1353

Title 26, Internal Revenue Code

Last Updated

Sep 22, 2026

Release point: 119-110