(a) In general. The Maritime Administrator will administer and enforce the agreement in a manner which will insure that the fund is properly established, that the assets in the fund are used to accomplish the program and that the party fully complies with all obligations and responsibilities. This section specifies the reports which must be submitted to the Maritime Administrator and sets forth the procedures for administering the agreement.

(b) Reporting requirements—

(1) In general. This paragraph describes the reports required to be submitted to the Maritime Administrator by the party.

(2) Submission dates. Reports must be submitted annually, in triplicate, for the party's taxable year not later than 90 days after the close of each reporting period. An affidavit regarding the operation of qualified agreement vessels as required by paragraph (b)(7) of this section shall be submitted concurrently with each annual report.

(3) Cumulation. The annual report submitted following the close of the party's taxable year shall be cumulative for the party's entire taxable year.

(4) Certification. The annual report shall be accompanied by an opinion of an independent certified public accountant to the effect that exhibits (see paragraph (b)(5) of this section) composing the accounting have been prepared in accordance with all published orders, rules, regulations and instructions issued or adopted by the Maritime Administrator.

(5) Format. The reports shall consist of the following exhibits:

(i) “Exhibit A”—a summary of cash, securities and stock on deposit (showing the adjusted basis for securities and stock), including a subtotal of cash, securities and stock on deposit, net amount of accrued deposits to and accrued withdrawals from the fund and the fund total at the end of the period, and if applicable, a summary of the portion of the fund which represents a “CCF: Security Amount” pursuant to an Agreement Covering the Dual Use of a Capital Construction Fund;

(ii) “Exhibit A-1”—a summary of balances in all cash accounts within the fund at the end of the period;

(iii) “Exhibit A-2”—a summary of the securities and stock within the fund at the end of the period (showing both the adjusted basis and fair market value of each item);

(iv) “Exhibit A-3”—a summary of the accrued deposits to and accrued withdrawals from the fund at the end of the period;

(v) “Exhibit B”—a transcript of transactions occurring within the fund during the period by date;

(vi) “Exhibit C”—a summary showing the opening balance, additions thereto due to deposits to the fund, subtractions therefrom due to withdrawals from the fund, and the closing balance for the period for each of the three separate accounts: ordinary income account, capital gains account and capital account; and

(vii) “Exhibit D”—a summary, by vessel, of the qualified withdrawals made from the fund during the period.

(6) Sample report. A sample report is contained in appendix III of this part.

(7) Affidavit. An official of the party who is knowledgeable about the operation of the party's qualified agreement vessels shall submit an affidavit for each taxable year indicating that the party's qualified agreement vessels operated only in qualified trades during such taxable year, or if any such vessel operated in a trade other than a qualified trade, the details of such operation. See §390.5(c) of this part for a description of what constitutes a qualified trade. A sample affidavit is contained in appendix V of this part.

(8) Failure to submit reports. The failure by a party to make the timely submission of any report or affidavit required by this section shall constitute a material breach of the agreement unless the Maritime Administrator shall determine that such failure was excusable. See §390.13 (relating to the failure to fulfill a substantial obligation under the agreement).

(c) Review in the event of changed circumstances. Each agreement provides that the party shall promptly inform the Maritime Administrator of any change in circumstances which affects its agreement. Such changes may be mere form, such as a change of the party's name, or substantive such as the sale of an eligible agreement vessel. The Maritime Administrator may require a full review of the agreement if in his opinion the changed circumstances materially affect the agreement.

(d) Modification of agreement—

(1) In general. The agreement is subject to modification and amendment by mutual consent. However, except in special circumstances, the Maritime Administrator will not consent to modification or amendment of the standard part of the agreement unless such modification or amendment is of uniform application to similarly situated parties. The Maritime Administrator will normally agree to modification or amendment of the schedules subject to the restriction in paragraph (d)(2) of this section.

(2) Limitations on modification of schedules. The Maritime Administrator will not agree to modification or amendment of the schedules (as described in §390.4) when, in his opinion, such modification or amendment delays imposition of Federal Income Tax in a manner not contemplated or authorized by the Act, or if the proposed modification or amendment would not be in consonance with the policies of the Act, these rules and regulations or the joint regulations.

(e) Fund adjustment upon modification. Upon application by a party for modification or amendment of the agreement, the Maritime Administrator will determine whether the requested modification or amendment would result in an amount held in the fund in excess of an amount determined to be necessary or appropriate to carry out the program. If such an excess is created in the fund by such modification or amendment, the Maritime Administrator will require a nonqualified withdrawal (as defined in §390.10) of such excess as a condition to the modification or amendment.

[41 FR 4265, Jan. 29, 1976, as amended at 41 FR 39751, Sept. 16, 1976; 55 FR 34928, Aug. 27, 1990]