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Department of the Treasury
Internal Revenue Service
Instructions for Form 8902

(Rev. April 2018)
Alternative Tax on Qualifying Shipping Activities

Section references are to the Internal How To File requirement is met when determined
Revenue Code unless otherwise noted. by treating all members of such group
File Form 8902 by attaching it to the
corporation's Form 1120 or Form as one person.
Future Developments
1120-F. Bareboat charters. A person is
For the latest information about treated as operating and using a
developments related to Form 8902 Definitions vessel that it has chartered out on
and its instructions, such as bareboat charter terms only if:
Qualifying vessel operator. The
legislation enacted after they were The vessel is (a) temporarily
term “qualifying vessel operator”
published, go to IRS.gov/Form8902. surplus to the person's requirements
means any corporation that operates
one or more qualifying vessels and and the term of the charter does not
What’s New meets the shipping activity exceed 3 years, or (b) bareboat
Alternative tax rate for fiscal year requirement. See the definitions of chartered to a member of a controlled
filers. Public Law 115-97 reduced these terms below. group which includes such person or
to an unrelated person who
the highest corporate tax rate from Operating a vessel. Except as sub-bareboats or time charters the
35% to 21%, effective for tax years provided in the definition of bareboat vessel to such a member (including
beginning after December 31, 2017. charters below, a person is treated as the owner of the vessel); and
Under section 11(b), as amended by operating any vessel during any The vessel is used as a qualifying
section 15, corporations with fiscal tax period if: vessel by the person to whom
years beginning before January 1, Such vessel is owned by, or ultimately chartered.
2018, and ending after December 31, chartered (including a time charter) to,
2017, figure and apportion their the person, or the person provides U.S. foreign trade. The term “U.S.
alternative tax by blending the 35% services for such vessel pursuant to foreign trade” means the
rate in effect before January 1, 2018, an operating agreement; and transportation of goods or passengers
with the 21% rate in effect after Such vessel is in use as a qualifying between a place in the United States
December 31, 2017. See the vessel during such period. and a foreign place or between
instructions for line 30. foreign places.
Qualifying vessel. A self-propelled See section 1355 for more
(or combination self-propelled and
General Instructions definitions and special rules that apply
non-self-propelled) U.S. flag vessel of with respect to the above definitions.
Purpose of Form not less than 6,000 deadweight tons
used exclusively in the U.S. foreign
Form 8902 is used by qualifying Partnerships and Other
trade during the period the election is
vessel operators (defined below) who Pass-Through Entities
in effect.
are making an alternative tax election In applying these rules to a partner in
under section 1354(a) or who have Shipping activity requirement. A a partnership:
made such an election previously. corporation meets this requirement for Each partner is treated as operating
The form is used to make such an any tax year only if the following vessels operated by the partnership;
election or report the termination of requirement is met for each of the 2 Each partner is treated as
such an election, to report information preceding tax years: On average conducting the activities conducted by
relating to such an election, and to during the tax year, at least 25% of the the partnership; and
figure the alternative tax. aggregate tonnage of qualifying The extent of a partner's ownership,
vessels used by the corporation was charter, or operating agreement
Who Must File owned by such corporation or interest in any vessel operated by the
Form 8902 must be filed by a chartered to such corporation on partnership will be determined on the
qualifying vessel operator (defined bareboat charter terms (see definition basis of the partner's interest in the
below) who is making an alternative below). partnership.
tax election under section 1354(a) or Special rule for first year of A similar rule applies to other
who is reporting the termination of election. A corporation meets this pass-through entities.
such an election. The form must also requirement for the first tax year for
be used by a qualifying vessel which this election is in effect only if
operator who has a valid election in this requirement is met for the
effect to report information pertaining preceding tax year.
to that election and to figure the
alternative tax. Controlled groups. A corporation
that is a member of a controlled group
meets this requirement only if such

Mar 27, 2018 Cat. No. 39897X

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a single employer under section 52(a) secondary activities that does not
Specific Instructions or (b) if sections 52(a)(1) and (2) did exceed 20% of line G(1).
not apply.
Part I. Section 1354 Electing groups. In the case of an
Line G(1). Core Qualifying electing group, the above rules are
Election or Termination applied as if the group were one
Activities
Item B Enter on line G(1) the corporation's entity, and the 20% limitation is
A corporation must make the gross income from core qualifying allocated among the corporations in
alternative tax election on or before activities. Attach a schedule. the group.
the due date (including extensions of Line G(2)(b). Amount that exceeds
time to file) of the income tax return for For purposes of this election, the the 20% limit. Enter on line G(2)(b)
the tax year for which the election is term “core qualifying activities” means the corporation's gross income from
made. activities in operating qualifying secondary activities that exceeds
vessels in U.S. foreign trade.
Election by a member of a control- 20% of line G(1).
led group. An election under section Line G(2). Qualifying Attach a schedule showing
1354(a) by a member of a controlled Secondary Activities computations for lines G(2)(a) and (b).
group applies to all qualifying vessel For purposes of this election, the term Example 1. The corporation has
operators that are members of such "qualifying secondary activities" gross income from core qualifying
group. means secondary activities (defined activities of $20 million and gross
Item C below) but only to the extent that the income from secondary activities of
gross income derived by the $5 million. The corporation enters $20
Generally, a revocation of an election million on line G(1), $4 million (20% of
corporation from such activities does
under section 1354(a) made: $20 million) on line G(2)(a), and $1
not exceed 20% of the gross income
On or before the 15th day of the 3rd million (gross income from secondary
derived by the corporation from its
month of the tax year will be effective activities of $5 million less the $4
core qualifying activities.
on the 1st day of that tax year; or million limit) on line G(2)(b).
After the 15th day of the 3rd month Secondary activities. The term
of the tax year will be effective the 1st "secondary activities" means: Example 2. The facts are the
day of the following tax year. The active management or same as in Example 1 above, except
However, if the revocation specifies operation of vessels other than the corporation has gross income
a date for revocation that is on or after qualifying vessels in the U.S. foreign from secondary activities of $3 million.
the day on which the revocation is trade; The corporation would enter $3 million
made, the revocation will be effective The provision of vessel, barge, on line G(2)(a) and zero on line G(2)
for tax years beginning on and after container, or cargo-related facilities or (b). Gross income from secondary
the date of revocation specified. services to any person; and activities of $3 million is less than the
Other activities of the electing $4 million limit.
Item D corporation and other members of its Line G(3). Qualifying Incidental
An election under section 1354(a) will electing group that are an integral part
Activities
be terminated effective on and after of its business of operating qualifying
the date the corporation ceases to be vessels in U.S. foreign trade, For purposes of this election, the term
a qualifying vessel operator. including: “qualifying incidental activities” means
shipping-related activities if:
Election after termination. If a 1. Ownership or operation of
qualifying vessel operator made the barges, containers, chassis, and other 1. They are incidental to the
election under section 1354(a) and equipment that are the complement corporation's core qualifying activities,
subsequently revoked the election of, or used in connection with, a 2. They are not qualifying
(Item C) or ceased to be a qualifying qualifying vessel in U.S. foreign trade; secondary activities, and
vessel operator (Item D), that operator 2. The inland haulage of cargo 3. The gross income derived by
(and any successor operator) is not shipped, or to be shipped, on the corporation from such activities
eligible to make another section qualifying vessels in U.S. foreign does not exceed 0.1% of the
1354(a) election for any tax year trade; and corporation's gross income from its
before the fifth tax year that begins 3. The provision of terminal, core qualifying activities.
after the first tax year for which the maintenance, repair, logistical, or
Line G(3)(a). Amount included in
termination is effective, unless the IRS other vessel, barge, container, or
the 0.1% limit. Enter on line G(3)(a)
consents to the election. cargo-related services that are an
the corporation's gross income from
integral part of operating qualifying
incidental activities that does not
Part II. Other Information vessels in U.S. foreign trade.
exceed 0.1% of line G(1).
Question E The term “secondary activities”
The term “electing group” means a does not include any core qualifying Electing groups. In the case of an
controlled group of which one or more activities. electing group, the above rules are
applied as if the group were one
members is an electing corporation. Line G(2)(a). Amount included in entity, and the 0.1% limitation is
The term “controlled group” means 20% limit. Enter on line G(2)(a) the
any group which would be treated as corporation's gross income from

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allocated among the corporations in the sum of all columns of Part IV, Effective for tax years beginning after
the group. line 28. December 31, 2017, a corporation' s
alternative tax is figured by multiplying
Line G(3)(b). Amount that exceeds Line 9. Type of Ownership taxable income by 21% (0.21).
the 0.1% limit. Enter on line G(3)(b) Indicate in each column the type of However, under section 15,
the corporation's gross income from ownership for the vessel. Enter “O” for corporations with fiscal tax years
incidental activities that exceeds 0.1% an owned vessel, “L” for a leased beginning before January 1, 2018,
of line G(1). vessel, and “CL” for a capitalized and ending after December 31, 2017,
Attach a schedule showing lease. figure and apportion their tax by
computations for lines G(3)(a) and (b). blending the rates in effect before
Line 10. Type of Vessel Use
January 1, 2018, with the rate in effect
Line H. Gross Income From Indicate in each column the type of after December 31, 2017. Figure the
Qualifying Shipping Activities vessel use. Enter “BB” for bareboat corporation's alternative tax for the
Excluded From Gross Income charter out, “TC” for time charter out, 2017 fiscal tax year using the
on the Corporation's Income and “OI” for operating income. worksheet below.
Tax Return
Part IV. Notional Shipping
Enter on line H the total of lines G(1), 1. Total annual notional shipping
G(2)(a), and G(3)(a). Do not include Income income (Part V, line 29)
this amount in gross income on the Line 21. Ownership Percentage 2. Tax on line 29 figured using the 35%
corporation's Form 1120 or Form tax rate
Enter the corporation's percentage of
1120-F. Furthermore, do not include 3. Tax on line 29 figured using the 21%
ownership in the vessel. If, for any
on the corporation's Form 1120 or rate
period, two or more persons are
Form 1120-F any item of loss, 4. Multiply line 2 by the number of days
operators of a qualifying vessel, the
deduction, or credit with respect to in the corporation's tax year before
notional shipping income from the January 1, 2018
this line H excluded income.
operation of such vessel for that 5. Multiply line 3 by the number of days
Note. The amounts entered on lines period must be allocated among the in the corporation's tax year after
G(2)(b) and G(3)(b) must be included operators on the basis of their December 31, 2017
in gross income on the corporation's respective ownership, charter, and 6. Divide line 4 by the total number of
Form 1120 or Form 1120-F. operating agreement interests in the days in the corporation's tax
year
vessel.
7. Divide line 5 by the total number of
Part III. Vessel Information days in the corporation's tax
With respect to Parts III and IV, Part V. Alternative Tax year
complete a separate column for each Line 30. Alternative Tax on 8. Add lines 6 and 7. This is the
corporation's total alternative tax for
qualifying vessel. If the corporation Qualifying Shipping Activities the fiscal tax year
has more than four qualifying vessels,
attach separate sheets for Parts III Enter the highest rate of tax
and IV using the same size and format applicable for the period of qualified
as Form 8902. Also, on line 29, enter shipping activities, under section 11.

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Instructions for Form 8902 (Rev. 4-2018) -3-

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