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Title 26 — Internal Revenue CodeRelease 119-73

§1353 Notional Shipping Income

Title 26 › Subtitle 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 Apr 6, 2026|Official source

Summary

Shipping companies that elect the tonnage tax pay tax on "notional shipping income" instead of actual profits. For each qualifying vessel, that income equals a daily amount times the number of days the ship operated in United States foreign trade. The daily amount is 40 cents per 100 tons of the ship's net tonnage up to 25,000 net tons, plus 20 cents per 100 tons above that. If some of a ship's income is already excluded from gross income, the notional amount is cut back in proportion. When two or more operators share a vessel, the income is split based on their ownership, charter, and operating interests.

Full Legal Text

Title 26, §1353

Internal Revenue Code — Source: USLM XML via OLRC

(a)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)(1)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)the daily notional shipping income, and
(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)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)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)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

Apr 6, 2026

Release point: 119-73