Construction Reserve Funds

12 Months Ended

Dec. 31, 2021

Restricted Cash And Investments [Abstract]

Construction Reserve Funds

6. 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 (“MARAD”). 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 MARAD. 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 MARAD 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, 2021, the Company had no balance in short-term construction reserve funds included in cash and cash equivalents. As of December 31, 2020, the Company had $4.2 million in short-term construction reserve funds included in cash and cash equivalents. During the years ended December 31, 2021, 2020 and 2019, construction reserve fund withdrawals totaled $4.2 million, $9.1 million and $15.2 million, respectively.