The Maritime Administration (MARAD) has published a notice of proposed rulemaking that would substantially revise the regulations governing the Capital Construction Fund (CCF) Program, found at 46 CFR Part 390. Published in the Federal Register on September 22, 2026, this is the first comprehensive update to the CCF regulations since MARAD first introduced them in 1976.
The CCF Program allows owners and operators of U.S. flagged vessels to defer federal income tax on earnings deposited into a CCF account, provided those funds are ultimately used to construct, reconstruct, or acquire qualifying vessels. Deferred taxes are eventually recovered when a vessel financed with CCF funds is sold, since the vessel’s cost basis is reduced by the amount of CCF funds used unless the proceeds are re-deposited into a CCF account. As of the proposed rule, there were 129 active CCF Agreements holding approximately $2.56 billion on deposit.
The proposed rule conforms MARAD’s regulations to the National Defense Authorization Act for Fiscal Year 2023, which extended CCF Program eligibility to all U.S. built vessels engaged in either domestic or foreign commerce, eliminating prior restrictions limiting the program to certain geographic trades. Because the existing regulatory text was never updated to reflect this expansion, vessel owners have faced confusion and administrative burden, including outdated liquidated damages provisions tied to now obsolete trading restrictions.
The proposed rule also introduces a new mechanism to automatically terminate CCF Agreements that have gone inactive. Specifically, agreements where a program objective has not commenced within ten years, or where the account balance has fallen to zero for ten years without an active objective, the Agreement will terminate automatically. MARAD explains that many existing agreements were established years ago for projects that are no longer viable, leaving account holders to either let funds sit idle or make a non-qualified withdrawal and pay deferred taxes at the highest marginal rate.
Other notable changes include clarifying the maximum completion time for reconstruction projects, expanding the ability to use CCF funds for vessel acquisitions, and raising the minimum reconstruction program threshold from a strict $1,000,000 per-vessel requirement to a more flexible $3,000,000 threshold that can be met by aggregating the costs of multiple smaller vessels. MARAD estimates this could open the program to smaller operators, since over 80 percent of the roughly 1,800 operators on the nation’s inland waterways run ten or fewer vessels and were previously excluded by the per-vessel minimum.
There are a number of other rule changes. Some are less favorable to account holders. For example, historically, MARAD allowed a CCF account holder to purchase used vessels with CCF funds as part of a CCF program (even if the vessels were not substantially reconstructed).
Comments on the proposed rule are due within 60 days of publication. Vessel owners, operators, and shipyards currently participating in or considering the CCF Program should review the proposed regulatory text closely, particularly the new automatic termination provisions, since existing account holders with inactive or zero balance agreements may need to take affirmative steps to preserve their agreements once the rule is finalized. For more information about this update, contact Liskow attorneys Leon Rittenberg III and Kevin Naccari, and visit Liskow’s Tax Practice page.