But in the appropriately-named Surface Transportation Assistance Act of 1982, Congress reinstated a tax deduction for going on certain American cruises for business purposes. Hawaiian Senator Spark Matsunaga explained that it would "encourage the building of our merchant marine fleet," so that the cruise liners could ferry troops and help defend America against foreign invasion.
Internal Revenue Code section 274(h)(2) provides that the costs of a cruise are tax-deductible if:
(1) the meetings on the cruise are directly related to the taxpayer's business,
(2) the cruise ship is a vessel registered in the United States,
(3) all ports of call of the ship are in the United States or its possessions, and
(4) the tax return contains a statement, signed by the cruise meeting organizer, describing what the taxpayer did on each day of the cruise.
The Carnival Triumph, for example, would not qualify because it visited Mexico and because it is registered in the Bahamas. But thanks to the support of Congress, there is now a cottage industry of Alaskan, Hawaiian, and Puerto Rican cruise seminars for doctors and dentists, who finally obtain the rare opportunity to learn about the latest developments in their field.
The maximum deduction for all cruise-related business activities is limited to $2,000 a year. The deduction is most useful to taxpayers who are self-employed or partners in a business partnership, because of more general limitations on tax deductions by employees.
Section 274 Disallowance of certain entertainment, etc., expenses.
(h)(2) Conventions on cruise ships.
In the case of any individual who attends a convention, seminar, or other meeting which is held on any cruise ship, no deduction shall be allowed under section 162 for expenses allocable to such meeting, unless the taxpayer meets the requirements of paragraph (5) and establishes that the meeting is directly related to the active conduct of his trade or business and that—
all ports of call of such cruise ship are located in the United States
or in possessions of the United States.
(5) Reporting requirements.
No deduction shall be allowed under section 162 for expenses allocable to attendance at a convention, seminar, or similar meeting on any cruise ship unless the taxpayer claiming the deduction attaches to the return of tax on which the deduction is claimed—
(A) a written statement signed by the individual attending the meeting which includes—
(i) information with respect to the total days of the trip, excluding the days of transportation to and from the cruise ship port, and the number of hours of each day of the trip which such individual devoted to scheduled business activities,
(ii) a program of the scheduled business activities of the meeting, and
(iii) such other information as may be required in regulations prescribed by the Secretary; and
(B) a written statement signed by an officer of the organization or group sponsoring the meeting which includes—
(i) a schedule of business activities of each day of the meeting,
(ii) the number of hours which the individual attending the meeting attended such scheduled business activities, and
(iii) such other information as may be required in regulations prescribed by the Secretary.