Department of the Treasury
Instructions for Form 8902
Internal Revenue Service
(For use with December 2005 revision of Form 8902)
Alternative Tax on Qualifying Shipping Activities
Section references are to the Internal Revenue Code unless otherwise noted.
the tax year, at least 25% of the
aggregate tonnage of qualifying vessels
used by the corporation was owned by
Purpose of Form
such corporation or chartered to such
Part I. Section 1354
corporation on bareboat charter terms
Form 8902 is used by qualifying vessel
(see definition below).
Election or Termination
operators (defined below) who are
making an alternative tax election under
Special rule for first year of election.
section 1354(a) or who have made such
A corporation meets this requirement for
an election previously. The form is used
the first tax year for which this election is
A corporation must make the alternative
to make such an election or report the
in effect only if this requirement is met for
tax election on or before the due date
termination of such an election, to report
the preceding tax year.
(including extensions of time to file) of the
information relating to such an election,
income tax return for the tax year for
Controlled groups. A corporation
and to compute the alternative tax.
which the election is made.
that is a member of a controlled group
meets this requirement only if such
Election by a member of a controlled
Who Must File
requirement is met when determined by
group. An election under section 1354(a)
Form 8902 must be filed by a qualifying
treating all members of such group as
by a member of a controlled group
vessel operator (defined below) who is
applies to all qualifying vessel operators
making an alternative tax election under
that are members of such group.
Bareboat charters. A person is treated
section 1354(a) or who is reporting the
as operating and using a vessel that it
termination of such an election. The form
has chartered out on bareboat charter
must also be used by a qualifying vessel
Generally, a revocation of an election
terms only if:
operator who has a valid election in effect
under section 1354(a) made:
The vessel is (a) temporarily surplus to
to report information pertaining to that
On or before the 15th day of the third
the person’s requirements and the term of
election and to compute the alternative
month of the tax year will be effective on
the charter does not exceed 3 years or (b)
the first day of that tax year.
bareboat chartered to a member of a
After the 15th day of the third month of
controlled group which includes such
How To File
the tax year will be effective the first day
person or to an unrelated person who
File Form 8902 by attaching it to the
of the following tax year.
sub-bareboats or time charters the vessel
corporation’s Form 1120 or Form 1120-F.
to such a member (including the owner of
However, if the revocation specifies a
the vessel) and
date for revocation that is on or after the
The vessel is used as a qualifying
day on which the revocation is made, the
vessel by the person to whom ultimately
revocation will be effective for tax years
Qualifying vessel operator. The term
beginning on and after the date of
“qualifying vessel operator” means any
corporation that operates one or more
U.S. foreign trade. The term “U.S.
qualifying vessels and meets the shipping
foreign trade” means the transportation of
activity requirement. See the definitions of
goods or passengers between a place in
these terms below.
the United States and a foreign place or
An election under section 1354(a) will be
between foreign places.
terminated effective on and after the date
Operating a vessel. Except as provided
the corporation ceases to be a qualifying
in the definition of bareboat charters
See section 1355 for more definitions
below, a person is treated as operating
and special rules that apply with respect
any vessel during any period if:
to the above definitions.
Election after termination. If a
Such vessel is owned by, or chartered
qualifying vessel operator made the
(including a time charter) to, the person,
Partnerships and Other
election under section 1354(a) and
or the person provides services for such
subsequently revoked the election (Item
vessel pursuant to an operating
C) or ceased to be a qualifying vessel
operator (Item D), that operator (and any
In applying these rules to a partner in a
Such vessel is in use as a qualifying
successor operator) is not eligible to
vessel during such period.
Each partner is treated as operating
make another section 1354(a) election for
vessels operated by the partnership,
any tax year before the 5th tax year that
Qualifying vessel. A self-propelled (or
begins after the 1st tax year for which the
Each partner is treated as conducting
combination self-propelled and
the activities conducted by the
termination is effective, unless the IRS
non-self-propelled) U.S. flag vessel of not
consents to the election.
less than 10,000 deadweight tons used
The extent of a partner’s ownership,
exclusively in the U.S. foreign trade
charter, or operating agreement interest
Part II. Other Information
during the period the election is in effect.
in any vessel operated by the partnership
Shipping activity requirement. A
will be determined on the basis of the
corporation meets this requirement for
partner’s interest in the partnership.
any tax year only if the following
The term “electing group” means a
requirement is met for each of the two
A similar rule applies to other
controlled group of which one or more
preceding tax years: On average during
members is an electing corporation.
Cat. No. 39897X