OMSA Applauds IRS Focus on Foreign Vessels Not Complying With U.S. Filing

NEW ORLEANS, Nov. 2 /PRNewswire-USNewswire/ -- The Offshore Marine Service
Association applauds the Internal Revenue Service's (IRS) recently posted
directive to field officers establishing an issue management team in the wake
of an IRS analysis indicating that a significant number of foreign vessels
permitted to work in the U.S. offshore oil and gas industry aren't complying
with U.S. filing requirements.

In the directive, posted last week on the IRS web site, Keith M. Jones, the
IRS industry director of Natural Resources and Construction (NRC), noted that,
"In recent years, an increased number of foreign vessels have applied to enter
and work in the OCS (Outer Continental Shelf). Our analysis indicates that a
significant number of foreign vessels permitted to work in the OCS do not
comply with U.S. filing requirements."

OMSA President Ken Wells said, "This is a bad time for anyone to be seen as a
tax cheat in America, let alone a foreign corporation. There have been a lot
of news stories recently about shortfalls in tax revenues because of the
recession. It is more important than ever for the IRS to close in on foreign
companies that have been sidestepping their U.S. tax obligations."

The IRS identified three types of activity in its directive:
1. Contractors that perform services on the OCS (such as seismographic
testing, drilling, repair and salvage work);
2. Vessel operators that transport supplies and personnel between U.S.
ports
and locations on the OCS; and

3. Owners and/or operators of foreign-registered vessels that bareboat or
time charter to persons that are engaged in activities related to the
offshore exploration or exploitation.

OMSA represents the owners and operators of U.S. flag offshore service vessels
and the shipyards and other businesses that support that industry. Mr. Wells
reacted to the announcement saying, "This confirms something we have suspected
for a long time -- that many of the foreign vessels that work off the U.S.
coast on mineral leases granted by the U.S."

Wells noted that, under the IRS guidance, if a foreign vessel doesn't pay
taxes on work done here in the United States, the charterer of the vessel must
pay the IRS a 30% withholding to cover taxes that should have been paid.
"There have simply been too many instances in which foreign vessels were able
to significantly undercut the rates offered by U.S. vessels. Clearly if the
foreign boats are able to start out with a 30% beneficial cost differential
that makes it hard for Americans to compete."

He cited one example in which a company publically reported that it had to pay
the IRS $3.2 million because foreign vessels it chartered had not paid U.S.
taxes. He urged the IRS to also look at whether the foreign vessels are
making the proper income tax withholdings for foreign laborers who work in
offshore sector.

According to Wells, this announcement comes at a time when the Customs and
Border Protection Agency is reviewing a number of its rulings which have
permitted foreign vessels to carry a substantial amount of cargo to offshore
projects. The review by Customs of the foreign vessel activity falls under a
law called the Jones Act that prohibits foreign vessels from transporting
cargo between U.S. points. "We see the two initiatives as linked," Wells
said. "Not only do we believe these vessels have been carrying cargo that only
U.S. vessels should carry, but now we find out they are cheating our country
out of tax revenue as well."

The full text of the IRS field guidance may be accessed at
http://www.irs.gov/businesses/article/0,,id=214906,00.html

SOURCE Offshore Marine Service Association

Ken Wells of OMSA, +1-504-734-7622, kenwells@offshoremarine.org