IRS to probe foreign-flag OCS operations

From MarineLog: http://www.marinelog.com/DOCS/NEWSMMIX/2009nov00021.html

The U.S. Internal Revenue Service has established an “issue management team” after an analysis indicated that a significant number of foreign-flag vessels working in the U.S, offshore oil and gas industry are not complying with U.S. tax filing requirements.
OMSA, the Offshore Marine Service Association, says it applauds the move.

In[B] a directive, posted last week on the IRS web site[/B], Keith M. Jones, the IRS industry director of Natural Resources and Construction (NRC), noted that, "In recent years, an increased number of foreign vessels have applied to enter and work in the OCS (Outer Continental Shelf). Our analysis indicates that a significant number of foreign vessels permitted to work in the OCS do not comply with U.S. filing requirements."
OMSA President Ken Wells said, “This is a bad time for anyone to be seen as a tax cheat in America, let alone a foreign corporation. There have been a lot of news stories recently about shortfalls in tax revenues because of the recession. It is more important than ever for the IRS to close in on foreign companies that have been sidestepping their U.S. tax obligations.”

OMSA notes that the IRS identified three types of activity in its directive:
Contractors that perform services on the OCS (such as seismographic testing, drilling, repair and salvage work);
Vessel operators that transport supplies and personnel between U.S. ports and locations on the OCS; and
Owners and/or operators of foreign-registered vessels that bareboat or time charter to persons that are engaged in activities related to the offshore exploration or exploitation.
Wells noted that, under the IRS guidance, if a foreign vessel doesn’t pay taxes on work done here in the United States, the charterer of the vessel must pay the IRS a 30% withholding to cover taxes that should have been paid.

“There have simply been too many instances in which foreign vessels were able to significantly undercut the rates offered by U.S. vessels,” said Wells. "Clearly if the foreign boats are able to start out with a 30 percent beneficial cost differential that makes it hard for Americans to compete."
He cited one example in which a company publically reported that it had to pay the IRS $3.2 million because foreign vessels it chartered had not paid U.S. taxes. He urged the IRS to also look at whether the foreign vessels are making the proper income tax withholdings for foreign laborers who work in offshore sector.

According to Wells, this announcement comes at a time when the Customs and Border Protection Agency is reviewing a number of Jones Act rulings that have permitted foreign vessels to carry a substantial amount of cargo to offshore projects.

“We see the two initiatives as linked,” Wells said. “Not only do we believe these vessels have been carrying cargo that only U.S. vessels should carry, but now we find out they are cheating our country out of tax revenue as well.”
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Hmmm…the Adminstration seems to be awake now to the huge giveaway in the GoM, so when are they going to start going after the foreign mariners taking jobs from us Americans!?!

here’s something from OMSA on all of this

http://workboat.yellowbrix.com/pages/workboat/Story.nsp?story_id=137230408&category=empty%3Ainland+waterways&ID=workboat

NEW ORLEANS, Nov. 2 /PRNewswire-USNewswire/ – The Offshore Marine Service Association applauds the Internal Revenue Service’s (IRS) recently posted directive to field officers establishing an issue management team in the wake of an IRS analysis indicating that a significant number of foreign vessels permitted to work in the U.S. offshore oil and gas industry aren’t complying with U.S. filing requirements.

In the directive, posted last week on the IRS web site, Keith M. Jones, the IRS industry director of Natural Resources and Construction (NRC), noted that, “In recent years, an increased number of foreign vessels have applied to enter and work in the OCS (Outer Continental Shelf). Our analysis indicates that a significant number of foreign vessels permitted to work in the OCS do not comply with U.S. filing requirements.”

OMSA President Ken Wells said, “This is a bad time for anyone to be seen as a tax cheat in America, let alone a foreign corporation. There have been a lot of news stories recently about shortfalls in tax revenues because of the recession. It is more important than ever for the IRS to close in on foreign companies that have been sidestepping their U.S. tax obligations.”

The IRS identified three types of activity in its directive:

  1. Contractors that perform services on the OCS (such as seismographic
    testing, drilling, repair and salvage work);
  1. Vessel operators that transport supplies and personnel between U.S. ports and locations on the OCS; and
  1. Owners and/or operators of foreign-registered vessels that bareboat or
    time charter to persons that are engaged in activities related to the
    offshore exploration or exploitation.

OMSA represents the owners and operators of U.S. flag offshore service vessels and the shipyards and other businesses that support that industry.__ Mr. Wells reacted to the announcement saying, “This confirms something we have suspected for a long time – that many of the foreign vessels that work off the U.S. coast on mineral leases granted by the U.S.”

Wells noted that, under the IRS guidance, if a foreign vessel doesn’t pay taxes on work done here in the United States, the charterer of the vessel must pay the IRS a 30% withholding to cover taxes that should have been paid. “There have simply been too many instances in which foreign vessels were able to significantly undercut the rates offered by U.S. vessels. Clearly if the foreign boats are able to start out with a 30% beneficial cost differential that makes it hard for Americans to compete.”

He cited one example in which a company publically reported that it had to pay the IRS $3.2 million because foreign vessels it chartered had not paid U.S. taxes. He urged the IRS to also look at whether the foreign vessels are making the proper income tax withholdings for foreign laborers who work in offshore sector.

According to Wells, this announcement comes at a time when the Customs and Border Protection Agency is reviewing a number of its rulings which have permitted foreign vessels to carry a substantial amount of cargo to offshore projects. The review by Customs of the foreign vessel activity falls under a law called the Jones Act that prohibits foreign vessels from transporting cargo between U.S. points.__ “We see the two initiatives as linked,” Wells said. “Not only do we believe these vessels have been carrying cargo that only U.S. vessels should carry, but now we find out they are cheating our country out of tax revenue as well.”

I’m not in love with OMSA in anyway but I’m behind them 100% on this one!

They already have. I understand that alot of ground work is currently being layed and the U.S VS Foreign vessel playing field will soon be closer to a level field due to Federal and lets not forget STATE Taxes past due from foreign operators. All vessel owners will be paying taxes, not just the U.S.

[QUOTE=Jones Act Compliance Gulf;41849]They already have. I understand that alot of ground work is currently being layed and the U.S VS Foreign vessel playing field will soon be closer to a level field due to Federal and lets not forget STATE Taxes past due from foreign operators. All vessel owners will be paying taxes, not just the U.S.[/QUOTE]

Did anybody look at the USCG budget for next year that grants an exemption for foreign vessels hauling anchors and doing construction on the North Slope for five years? According to my interpretation, after that, it HAS to be US vessels. Hope they stay with that and it spreads to the GOM, not that there will be any work there.

[QUOTE=BMCSRetired;42007]Did anybody look at the USCG budget for next year that grants an exemption for foreign vessels hauling anchors and doing construction on the North Slope for five years? According to my interpretation, after that, it HAS to be US vessels. Hope they stay with that and it spreads to the GOM, not that there will be any work there.[/QUOTE]

That is also part of legislation that’s already been passed. That exemption ends in 2012. A large anchor handler is currently being built by Edison Chouest to take the place of the foreign flagged vessel. (Tor Viking)

[QUOTE=anchorman;42012]That is also part of legislation that’s already been passed. That exemption ends in 2012. A large anchor handler is currently being built by Edison Chouest to take the place of the foreign flagged vessel. (Tor Viking)[/QUOTE]

I knew that am, is anybody else building anything else domestically or will they keep extending the exemption?

[QUOTE=BMCSRetired;42045]I knew that am, is anybody else building anything else domestically or will they keep extending the exemption?[/QUOTE]

I don’t see a reason where that would be extended, but some may know more about that than I do. The 2010-2011 Coast Guard Reauthorization Bill that got stuck in limbo had the same text. I did not see a push for an extension. The obvious objective is to get exploration started, and it looks like the earliest will be 2012. By then, the large icebreaker from Chouest will be delivered. Between the Harvey Gulf and Chouest vessels, that may be all that Shell needs. The original plan that was submitted to MMS was drastically scaled back. It may still be posted on the MMS website, or whatever they’re called now. There was a need of foreign tonnage in the original plan - maybe not now since it will be a smaller campaign. I’m sure all of that will change once everything gets started up there.

I can only presume that 2012 is when the foreign flagged vessels that Gary Chouest contols will no longer be exempt ? Or only those of his competitors ?

[QUOTE=gswess;42298]I can only presume that 2012 is when the foreign flagged vessels that Gary Chouest contols will no longer be exempt ? Or only those of his competitors ?[/QUOTE]

What vessels are you referring to?..that Chouest controls???

Might be asking about the “Island Offshore” vessels which are a joint venture between Chouest and Ulstein.
From the Norwegian company website:

The Ulstein family’s reputation as designers and builders of offshore service vessels is well known. However the Ulstein family also has a 30 year history as owners of advanced service vessels. Following the acquisition of “Havila Chieftain”, a 1984 built anchor handler type ME 303 in 1999, members of the Ulstein family founded Island Offshore in 2000. Island Offshore took delivery of its first new building, a UT 722 L from Aker Langsten in December 2000. The vessel went straight on to a 2-year charter party for Statoil, which were completed in January 2003 and has since been on hire to Petrobras. Subsequently, the Ulstein family has expanded their ownership interests through strategic partnerships with industry leaders.

In April 2004, Island Offshore Management AS, which is majority owned by Island Offshore Shipholding LP, was established in order to manage fleet operations. Island Offshore Management AS has developed management systems in compliance with the guidelines from Det Norske Veritas and is certified by the Norwegian Maritime Directorate according to the ISM-code.
Island Offshore Shipholding LP is jointly owned with [U]Edison Chouest [/U]Offshore, the leading operator in United States for advanced and high quality service vessels. ECO owns and operates a fleet of approx. 150 offshore vessels worldwide with the majority in the US, Mexico, Brazil and West Africa.

In July 2005, Island Offshore Subsea was established. The company is jointly owned by Island Offshore Management AS and leading employees, and specializes in developing and implementing customized engineering solutions for Light Well Intervention and other sub sea well operations."

How many USA mariners work for Island Offshore? Anyone know any?
Just curious.
Tengineer

[QUOTE=tengineer;42327]
How many USA mariners work for Island Offshore? Anyone know any?
Just curious.
Tengineer[/QUOTE]

I never was even curious to ask, but I don’t know of any actually. The only vessel in the US is the OI 3, but the owners couldn’t hire American if they wanted to. The US has still failed to ratify STCW 95, and the NMD will not recognize our credentials for NOR vessels.

I’m on the Island Enforcer in the North Sea at the moment, but I work for Chouest just to add some confusion, and I will leave it at that.