(a) In general

(1) Defined. Any withdrawal from a fund which is not a qualified withdrawal is a nonqualified withdrawal.

(2) Tax aspects of a nonqualified withdrawal. For the tax aspects of a nonqualified withdrawal, see 46 U.S.C. 53511 and §3.7 of the joint regulations (§391.7 of this chapter).

(b) Permission required

(1) In general. The prior written permission of the Maritime Administrator is required before a nonqualified withdrawal may be made.

(2) Failure to secure permission. A nonqualified withdrawal made without the prior written permission of the Maritime Administrator shall constitute a material breach of the agreement unless the Maritime Administrator shall determine that failure to obtain prior written consent was excusable. See §390.13 (relating to failure to fulfill a substantial obligation under the agreement).

(3) Types of nonqualified withdrawals which will be permitted. Generally, the Maritime Administrator will give permission to make nonqualified withdrawals when:

(i) The party has incurred operating losses from the operations of agreement vessels which have impaired his working capital and it becomes necessary to reimburse its general funds to the extent of such losses;

(ii) The party desires to make an expenditure for research, development or design and such an expenditure is incident to new and advanced ship design, machinery and equipment;

(iii) The withdrawal would be a qualified withdrawal except for the fact that there is no tax basis left that can be reduced; or

(iv) The party demonstrates, to the satisfaction of the Maritime Administrator, that it cannot fulfill its program due to circumstances beyond its control or due to a change in circumstances which makes the completion of its program economically unfeasible.

[41 FR 4265, Jan. 29, 1976, as amended at 73 FR 56740, Sept. 30, 2008]

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