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Title 26, Internal Revenue CodeRelease 119-110

§1356 Qualifying Shipping Activities

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 › § 1356

Last updated Sep 22, 2026|Official source

Summary

Counts certain shipping work so it can get the tax treatment. It names three kinds of qualifying shipping activities: core qualifying activities (running qualifying ships in U.S. foreign trade), qualifying secondary activities (related shipping business like managing other vessels, providing vessel/barge/container/cargo services, inland haulage, owning related equipment, terminal or maintenance work, and other similar activities the Treasury allows), and qualifying incidental activities (small shipping tasks that are tied to the core work). Secondary activity income can only be counted if, ignoring these tax rules, it makes up no more than 20 percent of the company’s income from core activities. Incidental activity income must be no more than 0.1 percent of the income from core activities. If a group of companies elects together, the 20 percent and 0.1 percent tests apply to the group as one entity and the limits are divided among the members.

Full Legal Text

Title 26, §1356

Internal Revenue Code, Source: USLM XML via OLRC

(a)Qualifying shipping activities
For purposes of this subchapter, the term “qualifying shipping activities” means—
(1)core qualifying activities,
(2)qualifying secondary activities, and
(3)qualifying incidental activities.
(b)Core qualifying activities
For purposes of this subchapter, the term “core qualifying activities” means activities in operating qualifying vessels in United States foreign trade.
(c)Qualifying secondary activities
For purposes of this section
(1) In general
(2)Secondary activities
The term “secondary activities” means—
(A)the active management or operation of vessels other than qualifying vessels in the United States foreign trade,
(B)the provision of vessel, barge, container, or cargo-related facilities or services to any person,
(C)other activities of the electing corporation and other members of its electing group that are an integral part of its business of operating qualifying vessels in United States foreign trade, including—
(i)ownership or operation of barges, containers, chassis, and other equipment that are the complement of, or used in connection with, a qualifying vessel in United States foreign trade,
(ii)the inland haulage of cargo shipped, or to be shipped, on qualifying vessels in United States foreign trade, and
(iii)the provision of terminal, maintenance, repair, logistical, or other vessel, barge, container, or cargo-related services that are an integral part of operating qualifying vessels in United States foreign trade, and
(D)such other activities as may be prescribed by the Secretary pursuant to regulations.
Such term shall not include any core qualifying activities.
(d)Qualifying incidental activities
For purposes of this section, the term “qualified incidental activities” means shipping-related activities if—
(1)they are incidental to the corporation’s core qualifying activities,
(2)they are not qualifying secondary activities, and
(3)without regard to this subchapter, the gross income derived by such corporation from such activities does not exceed 0.1 percent of the corporation’s gross income from its core qualifying activities.
(e)Application of gross income tests in case of electing group
In the case of an electing group, subsections (c)(1) and (d)(3) shall be applied as if such group were 1 entity, and the limitations under such subsections shall be allocated among the corporations in such group.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

2005—Subsec. (c)(2). Pub. L. 109–135, § 403(g)(3)(B), inserted concluding provisions. Subsec. (c)(3). Pub. L. 109–135, § 403(g)(3)(A), struck out heading and text of par. (3). Text read as follows: “(A) In general.—Such term shall not include any core qualifying activities. “(B) Nonelecting corporations.—In the case of a corporation (other than an electing corporation) which is a member of an electing group, any core qualifying activities of the corporation shall be treated as qualifying secondary activities (and not as core qualifying activities).”

Statutory Notes and Related Subsidiaries

Effective Date

of 2005 Amendment

Amendments

by Pub. L. 109–135 effective as if included in the provisions of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which they relate, 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. § 1356

Title 26, Internal Revenue Code

Last Updated

Sep 22, 2026

Release point: 119-110