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Amounts determined by the IRS to cause your CCF

Reporting the additional tax and interest. Attach a

account balance to exceed the amount appropriate

statement to your income tax return showing your compu-

to meet your planned use of withdrawals. You will

tation of the tax and the interest on a nonqualified with-

generally be given 3 years to revise your plans to

drawal. Include the tax and interest on Form 1040, line 63

cover this excess balance.

(for 2005). To the left of line 63, write in the amount of tax

and interest and “CCF.”

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Amounts you leave in your account for more than 25

years. There is a graduated schedule under which

Tax benefit rule. If any portion of your nonqualified with-

the percentage applied to determine the amount of

drawal is properly attributable to contributions (not earn-

the nonqualified withdrawal increases from 20% in

ings on the contributions) you made to the CCF account

the 26th year to 100% in the 30th year.

that did not reduce your tax liability for any tax year prior to

the withdrawal year, the following tax treatment applies.

How to determine the source of nonqualified with-

1. The part that did not reduce your tax liability for any

drawals. When you make a nonqualified withdrawal from

year prior to the withdrawal year is not taxed.

your CCF account, the amount is treated as being with-

drawn in the following order from the accounts listed be-

2. That part is allowed as a net operating loss deduc-

low.

tion.

1. The ordinary income account.

More Information

2. The capital gain account.

This section briefly discussed the CCF program. For more

3. The capital account.

detailed information, see the following legislative authori-

ties.

Paying tax on nonqualified withdrawals. In general,

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nonqualified withdrawals are taxed separately from your

Section 607 of the Merchant Marine Act of 1936, as

other gross income and at the highest marginal tax rate in

amended (46 U.S.C. 1177).

effect for the year of withdrawal. However, nonqualified

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Chapter 2, Part 259 of title 50 of the Code of Federal

withdrawals treated as made from the capital gain account

Regulations (50 C.F.R., Part 259).

are taxed at a rate that cannot exceed 15% for individuals

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and 34% for corporations.

Subchapter A, Part 3 of title 26 of the Code of Fed-

eral Regulations (26 C.F.R., Part 3).

Partnerships and S corporations. Taxable

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TIP

nonqualified partnership withdrawals are sepa-

Section 7518 of the Internal Revenue Code (IRC

rately stated on Schedule K (Form 1065), line

7518).

20c, and allocated to the partners on Schedule K-1 (Form

The application kit you can obtain from NMFS at the

1065), box 20 (for 2005). Taxable nonqualified withdrawals

address or phone number given earlier may contain copies

by an S corporation are separately stated on Schedule K

of some of these sources of additional information. Also,

(Form 1120S), line 17d, and allocated to the shareholders

see their web page at

on Schedule K-1 (Form 1120S), box 17.

financial_services/ccf.htm.

Interest. You must pay interest on the additional tax due

to nonqualified withdrawals that are treated as made from

either the ordinary income or the capital gain account. The

How To Get Tax Help

interest period begins on the last date for paying tax for the

year for which you deposited the amount you withdrew

You can get help with unresolved tax issues, order free

from your CCF account. The period ends on the last date

publications and forms, ask tax questions, and get informa-

for paying tax for the year in which you make the nonquali-

tion from the IRS in several ways. By selecting the method

fied withdrawal. The interest rate on the nonqualified with-

that is best for you, you will have quick and easy access to

drawal is simple interest. The rate is subject to change

tax help.

annually and is published in the Federal Register.

Contacting your Taxpayer Advocate. If you have at-

You also can call NMFS at (301) 713-2393 (ext.

tempted to deal with an IRS problem unsuccessfully, you

204) to get the current interest rate.

should contact your Taxpayer Advocate.

The Taxpayer Advocate independently represents your

Interest deduction. You can deduct the interest you

interests and concerns within the IRS by protecting your

pay on a nonqualified withdrawal as a trade or business

rights and resolving problems that have not been fixed

expense.

through normal channels. While Taxpayer Advocates can-

Page 5

Publication 595 (Rev. February 2006) - Capital Construction Fund For Commercial Fishermen Page 5

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