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March 17, 2013

Ships Ahoy - Part 4: How Meetings at Sea Offer Tax and Cost Savings to Corporate Clients




By Susan J. Young

As meeting planners consider setting up an executive retreat, corporate meeting or conference on a cruise vessel or river boat, they likely will be asked by corporate clients about any potential tax or cost-savings benefits, either to the company or for employees taking such a trip.

Whether any trip is deductible for IRS purposes is a question that must be posed to a tax accountant based on the company’s specific plans. However, here are some general gleanings that may be valuable for planners to know.

Michael Beale, the charter and incentive manager, American Queen Steamboat Company, says there are special rules for U.S. taxpayers related to the deductibility of conventions, seminars or meetings conducted on cruise ships as business expenses.

He refers planners and consumers to IRS Publication 463, which says that generally, a U.S. taxpayer who sails on a ship for a business conference can deduct up to $2,000 per year of those expenses but only if all of the following requirements are met:

• The convention, seminar, or meeting is directly related to the organization’s trade or business.

• The cruise ship is a vessel registered (flagged) in the United States.

• All ports of call are in the United States or in possessions of the United States.

Other documentation requirements also apply. Again, check with a tax accountant based on the specific itinerary, ship and plans.

That said, the reality is that most cruise ships worldwide are foreign-flagged for tax, maritime or operational reasons. They are registered in such countries as the Bahamas, Bermuda, Panama, Italy or Malta, to name a few.

Of the large oceangoing ships in current service, only the Pride of America, operated by NCL America, is registered in the U.S.

Small-ship river lines with American-flagged ships? American Queen Steamboat Company plies Mississippi River and heartland U.S. waters with its 450-passenger American Queen.

Competitor American Cruise Lines has an American-flagged fleet that sails the Mississippi River as well as coastal and river voyages within the Pacific Northwest, New England, mid-Atlantic and Southeast regions.

Blount Small Ship Adventures also sails certain U.S. itineraries with 96-passenger American-flagged ships.

Among small-ship oceangoing lines flying the U.S. flag are Un-Cruise Adventures (www.un-cruise.com) and Alaskan Dream Cruises, as well as several vessels of Lindblad Expeditions branded as National Geographic Expeditions.

However, IRS regulations for deductions also require an itinerary that only calls at U.S. ports. Pride of America qualifies as it sails only within the islands of Hawaii, as do many voyages of the small-ship lines mentioned above.

Typically, though, many conferences or meeting groups will choose a cruise on a foreign-flagged ship, simply given the large number of ships in that category and the popularity of those brands. Tax benefits aside, our experts say MICE sector business functions – even those booked on a foreign-flagged line -- are still usually more economical than comparable arrangements at a land-based resort.

Because accommodations, dining and entertainment are among the cruise inclusions, Joni Rein, vice president of worldwide sales, Carnival Cruise Lines, says, “we hear time and time again that the value and total cost of holding a program on Carnival is greater than many tax benefits.”

Most cruise lines provide complimentary use of meeting space and state-of-the-art AV equipment. On some luxury ships, complimentary alcoholic beverages and paid gratuities also are included, among other perks; Regent Seven Seas Cruises also includes shore trips for its guests.

Landry & Kling, a Miami-based firm specializing in meetings at sea, has a helpful Knowledge Center at www.seasite.com; it includes articles detailing land-versus-sea cost savings as well as tax issues.

“Exceptional cruise values often offset tax savings,” says Sean Mahoney, global vice president of corporate and incentive sales, Silversea Cruises, an ultra-luxury line with Bahamian-registered vessels.

“In fact, many firms discover that their domestic [hotel and resort based] programs cost more than their cruise programs…even after factoring in tax deductions” for holding those meetings on U.S. soil, says Mahoney. He suggests planners seek advice from the company’s tax consultant or risk management advisor.

Summing it up, though, Landry & Kling estimates that a corporate meeting at sea can save an organization up to 40 percent when compared to similar arrangements at a hotel, conference center or resort.


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