The harbor maintenance tax (HMT) is a federal tax enacted pursuant to the Harbor Maintenance Revenue Act of 1986, (1) which provides for the conservation and improvement of the nation's water resources. The purpose of the HMT is to support the development and maintenance of U.S. ports and harbors by requiring that certain shippers, importers, exporters, (2) and vessel operators pay for the benefit of using these resources.
The harbor maintenance tax credit is a dollar-for-dollar state tax credit that may be claimed by a corporation subject to the corporate excise of G.L. c. 63, §§ 32 or 39, that has "paid qualifying harbor maintenance tax" to the federal government during the taxable year. G.L. c. 63, § 38P (Acts of 1996, Chapter 339, sec. 1). The credit is not subject to the fifty percent limitation of G.L. c. 63, § 32C, and may be carried forward (as reduced from year to year) from the year earned for five succeeding taxable years. Id. The credit may not reduce the corporate excise due below the minimum excise, currently $456. (3) Id. The harbor maintenance tax credit applies to qualified harbor maintenance tax paid on or after July 1, 1996.
This Technical Information Release (TIR) explains how taxpayer corporations may claim the Massachusetts harbor maintenance tax credit.
A. Harbor Maintenance Tax
The Harbor Maintenance Tax is an "excise" imposed "on any port use." See generally Internal Revenue Code ("I.R.C.") §§ 4461, 4462. "Port use" is defined as the loading or unloading of "commercial cargo" from a "commercial vessel" at a "port." "Port" is defined as any U.S. channel or harbor that is not an inland waterway and that is open to public navigation, but does not include a channel or harbor for which no federal funds have been used since 1977 or which was "deauthorized" by law prior to 1985. I.R.C. § 4462. The "complete list of ports" for purposes of the harbor maintenance tax is set out in Customs regulation 19 CFR 24.24. The "ports" in Massachusetts are: "Boston, " (4) "Gloucester," and "Fall River." Id. (5)
The amount of HMT imposed on any port use is the amount equal to 0.125 percent of the "value" of the commercial cargo. I.R.C. § 4461. HMT shall be paid by the "importer" in the case of cargo entering the United States; the "exporter" in the case of cargo exported from the United States; and the "shipper" in "any other case." Id. HMT shall be imposed in the case of cargo to be exported from the United States at the time of loading, and "in any other case" at the time of unloading. Id.
B. HMT Credit
Only "qualified harbor maintenance tax" may be used by a corporation to determine the amount of the credit; therefore, not all HMT paid by the corporation necessarily qualifies for the credit. "Qualified harbor maintenance tax" is:
the tax paid to the federal government by a corporation as a shipper, importer or exporter pursuant to [§ 4461] . . . subject to the following conditions and limitations: (1) the tax must be paid with respect to the shipment of break-bulk or containerized cargo; (2) the tax must be paid with respect to shipment by sea and ocean-going vessels through ports located in this commonwealth; and (3) tax paid with respect to passengers, the shipment of bulk cargo or the shipment of any other cargo or item of commerce not included within the meaning of ['break-bulk' or 'containerized' cargo] is not qualifying harbor maintenance tax. (6) G.L. c. 63, § 38P(b).
Only HMT paid for "break-bulk" and "containerized" cargo (assuming such cargo is also "commercial cargo" under I.R.C. § 4462) qualifies as harbor maintenance tax for purposes of the credit.
"Break-bulk cargo" is defined in part as "general goods . . . which are customarily shipped in . . . unitized form, held in the vessel's general holding area, and handled by the piece, unit or in separate lots . . . [and] includes road motor vehicles. . . ." See G.L. c. 63, § 38P(a). "Containerized cargo" is defined in part as "general goods . . . that are shipped in non-disposable, reusable, commercial sized shipping containers that are customarily used . . . for the . . . shipment of such goods. . . ." Id. "Unsegregated mass quantities" such as petroleum products, coal and bulk salt which are carried loose and are "customarily loaded and unloaded by pumping, scooping, shoveling or other similar means" are considered to be "bulk cargo" and as such do not qualify for the credit. Id.
The corporation claiming the credit must maintain adequate records regarding the amount of HMT paid at Massachusetts "ports" with respect to commercial cargo, such that the amount of HMT paid with respect to "break bulk" and "containerized cargo" is clearly distinguished from the amount of HMT paid with respect to other, nonqualifying cargo.
2. "shipment by . . . vessels through ports in this commonwealth"
Only HMT paid for "port use" at the three Massachusetts "ports" listed in Customs regulation 19 CFR 24.24 (see above) qualifies as harbor maintenance tax for purposes of the credit. "Sea and ocean going vessels" includes barges and other water-borne vessels customarily used for shipment of commercial cargo through "ports" in Massachusetts; all such vessels must be "commercial vessels" for the purposes of I.R.C. § 4462.
Only HMT "paid to the federal government by a corporation as a shipper, importer or exporter" qualifies as harbor maintenance tax for purposes of the credit. Generally, corporations that are "importers," "exporters" or "shippers" which are considered by the Customs Service to have paid the HMT, as evidenced by appropriate Customs documentation, (7) will be considered by the Department to be corporations that have "paid" the HMT to the federal government.
A corporation subject to G.L. c. 63, §§ 32 or 39, that has "paid" HMT to the federal government for "port use" at a Massachusetts "port," may claim the harbor maintenance tax credit allowed pursuant to G.L. c. 63, § 38P. The credit is equal to the amount of "qualified harbor maintenance tax paid" by that corporation for that "port use."
Commissioner of Revenue
March 14, 1997
2. In October 1995, the U.S. Court of International Trade held that the harbor maintenance tax was a "tax" upon exports and as such was prohibited by the Export Clause of the United States Constitution. United States Shoe Corp. v. United States, 907 F. Supp. 408 (1995). Customs was enjoined from collecting the HMT on exports, although, as of the date of this TIR, that injunction has been stayed pending appeal. See United States Shoe Corp. v. United States, 924 F. Supp. 1191 (Dec. 4, 1995). (return to text)
4. The regulation states that "Boston" "[i]ncludes all of the Port of Boston inshore of Castle Island on the Inner Harbor and Chelsea and Mystic Rivers and all points on the Weymouth Fore, and Town and Black Rivers, and Dorchester Bay. Movements between points on the Saugus River in the north to Scituate in the south are intraport." (return to text)
6. The credit does not apply to HMT paid "with respect to passengers." See G.L. c. 63, § 38(b)(3). Thus the credit may not be claimed by the "operator" of a commercial vessel who is liable for payment of HMT "when a passenger boards or disembarks [the] commercial vessel at a port." See 19 CFR 24.24(e)(4). (return to text)
7. For example, such documentation includes but is not limited to HMT Quarterly Summary Reports (Form 349), Shippers Export Declaration (SEDs), Entry Summary Forms, invoices, documentation of fee calculation, and similar records. (return to text)