By Alex M. Parker

Law360 (March 26, 2020, 8:19 PM EDT ) The $2 trillion coronavirus relief bill before the House includes language blocking foreign corporations from receiving assistance, which could prevent cruise lines and others that receive favorable tax treatment due to offshore parent entities from accessing $500 billion in loans.

The provision was included in the bill, which the Senate passed Wednesday, as Democrats increasingly blasted calls to bail out the cruise industry, which has been forced to halt activity amid the coronavirus pandemic. Critics claim cruise line companies, which are mostly incorporated offshore and receive a federal exemption on almost all of their taxable income, should not receive assistance from U.S. taxpayers.

The House of Representatives is expected to vote on the bill Friday.

Despite the prohibition, the cruise line companies and one of their biggest boosters, President Donald Trump, vowed to continue to look for ways to preserve the industry.

"They have thousands and thousands of people who work there. The cruise line business is very important," Trump said during a news conference Thursday. "We're going to work something out."

Trump also suggested that companies could be forced to reincorporate in the U.S. as a condition of receiving aid.

"I do like the concept of perhaps coming in and registering here, coming into the United States," Trump said.

The restriction was tucked away in one of the bill's most contentious sections, a $454 billion fund to supply loans to distressed companies at the U.S. Department of the Treasury's discretion. It states that the bill's funds could go only to "businesses that are created or organized in the United States or under the laws of the United States and that have significant operations in and a majority of its employees based in the United States."

Omri Marian, professor of taxation at the University of California, Irvine, School of Law, said the language "created or organized under the laws of the United States" has a long history in the Internal Revenue Code to define a domestic corporation.

"This is how we define, right now, what is domestic for tax purposes," he said.

But he added that it was unclear whether foreign-parented companies could apply for aid through a U.S. subsidiary under the bill's language.

The Cruise Line International Association, an industry group based in Washington, D.C., said it was grateful that the bill would help travel agents and other small businesses linked to the cruise lines, but would push for more direct assistance.

"For the more than 421,000 people in the United States whose jobs are supported by the cruise industry, we will continue to work with policymakers to help our community recover from the impact of this pandemic," the organization said. 

Early versions of the 2017 Tax Cuts and Jobs Act included language that would have created a new tax system exclusively for the industry, with payments calculated based on the percentage of U.S. passengers on a cruise and how long they remained within 12 nautical miles of the U.S. shoreline. That chapter was stripped from the final version following objections from Sen. Dan Sullivan, R-Alaska.

The White House did not respond to requests for comment.

--Editing by Neil Cohen.

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