The US Maritime Administration has proposed a major revision of its Capital Construction Fund regulations, covering 129 agreements with approximately $2.56 billion currently on deposit.
MARAD published the notice of proposed rulemaking on 22 September 2026. The agency said many CCF agreements were established years ago and contain scheduled vessel projects that are no longer viable. Participants can consequently be left with money allocated to projects that will not proceed or face deferred tax liabilities when making non-qualified withdrawals.
The proposed changes would establish a mechanism for amending outdated agreements and update the regulations to reflect statutory changes made under the National Defense Authorization Act for Fiscal Year 2023. That legislation expanded CCF eligibility to US-built vessels engaged in US domestic or foreign commerce and removed previous geographic trade restrictions.
The revision would also change requirements for reconstruction-only programmes. Current rules generally require at least $1 million of reconstruction for each vessel when an agreement does not include a new construction objective.
Under the proposal, reconstruction costs for multiple vessels could instead be combined, but the total must exceed $3 million. The work must also qualify for capitalization under the Internal Revenue Code and result in vessels that are significantly more competitive. MARAD said aggregating costs across several vessels could allow operators with smaller vessels to meet the programme threshold.
The proposal would not allow a reconstruction objective for an existing vessel that is more than 25 years old when CCF funds are withdrawn.
MARAD is also proposing clearer rules governing vessel acquisitions. CCF funds could be used in the circumstances specified in the proposed regulation, including the purchase of a new vessel from the shipyard that constructed it.
The proposal would also permit the purchase of a vessel more than one year old when substantial reconstruction is completed within 18 months after CCF funds are withdrawn. Other permitted cases would include acquiring a contract to build a new qualified vessel, acquiring an interest in a partnership or limited liability company, and acquiring existing vessels as part of specified purchases of a corporation, limited liability company, partnership or association.
Construction or reconstruction would generally have to be completed within 36 months from the date work begins unless MARAD approves a different period.
The agency is also seeking to place clearer limits on inactive agreements and long-term deposits. An agreement could be considered inactive and subject to termination if a Schedule B objective has not started within 10 years after the agreement was established and MARAD has not approved an extension.
An agreement with a zero balance across all depositories after 10 years could also become subject to termination under specified conditions. Deposits assigned to an individual Schedule B objective could accumulate for no more than 25 years.
Participants would no longer be able to make additional deposits after reaching 100% of the anticipated cost of all Schedule B objectives unless the agreement is amended to add further objectives.
The CCF programme enables qualifying vessel owners and operators to defer federal income tax on eligible funds deposited for vessel construction, reconstruction or acquisition. The programme applies to qualifying US-built vessels operating in US domestic or foreign commerce.
MARAD said it does not expect the proposed revisions to add compliance obligations or costs. The agency is accepting public comments on the proposal through 23 November 2026.
