Annual report pursuant to Section 13 and 15(d)

Note 5 - Construction Reserve Funds

v3.19.1
Note 5 - Construction Reserve Funds
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Restricted Assets Disclosure [Text Block]
5.
CONSTRUCTION RESERVE FUNDS
 
The Company has established, pursuant to Section
511
of the Merchant Marine Act,
1936,
as amended, construction reserve fund accounts subject to agreements with the Maritime Administration. In accordance with this statute, the Company is permitted to deposit proceeds from the sale of certain vessels into the construction reserve fund accounts and defer the taxable gains realized from the sale of those vessels. Qualified withdrawals from the construction reserve fund accounts are only permitted for the purpose of acquiring qualified U.S.-flag vessels as defined in the statute and approved by the Maritime Administration. To the extent that sales proceeds are reinvested in replacement vessels, the carryover depreciable tax basis of the vessels originally sold is attributed to the U.S.-flag vessels acquired using such qualified withdrawals. The construction reserve funds must be committed for expenditure within
three
years of the date of sale of the equipment, subject to
two one
-year extensions that can be granted at the discretion of the Maritime Administration or be released for the Company's general use as nonqualified withdrawals. For nonqualified withdrawals, the Company is obligated to pay taxes on the previously deferred gains at the prevailing statutory tax rate plus penalties and interest thereon for the period such taxes were deferred.
 
As of
December 
31,
2018,
2017
and
2016,
the Company's construction reserve funds are classified as non-current assets in the accompanying consolidated balance sheets as the Company has the intent and ability to use the funds to acquire equipment. Construction reserve fund transactions for the years ended
December 31
were as follows (in thousands):
 
   
2018
   
2017
   
2016
 
Withdrawals
  $
(17,300
)   $
(39,163
)
  $
(87,820
)
Deposits
   
     
6,315
     
27,414
 
    $
(17,300
)   $
(32,848
)
  $
(60,406
)