The "Building Ships in America Act of 2025" proposes comprehensive amendments to the Internal Revenue Code, aiming to strengthen the United States' national defense, economic security, and maritime industry. A central provision is the creation of a new **United States Vessel Investment Credit**, offering up to a 40% tax credit for qualified investments in the construction, repowering, or reconstruction of U.S. flag cargo vessels in American shipyards. This credit includes additional percentages for utilizing U.S.-domiciled insurance and American Bureau of Shipping classification.

To qualify for this vessel credit, the cargo vessels must operate in U.S. foreign trade, agree to operate as a U.S. vessel for at least 10 years, and have an emergency preparedness agreement. The bill explicitly excludes vessels or shipyards linked to "foreign entities of concern," a broadly defined term encompassing certain foreign governments, individuals, and entities deemed detrimental to U.S. national security. Construction for this credit must begin before January 1, 2033, and the credit applies to property placed in service after December 31, 2025.

Another key incentive is the new **Shipyard Investment Tax Credit**, providing a 25% credit for qualified investments in "qualified shipyard facilities." These facilities must be located within the United States and primarily serve to construct or repair commercial or military oceangoing vessels, or manufacture critical components and equipment for them. This credit also applies to property placed in service after December 31, 2025, but terminates after December 31, 2032, and cannot be claimed in conjunction with the vessel investment credit for the same property.

The legislation also significantly reforms **Merchant Marine Capital Construction Funds (CCF)**, expanding the types of revenue that can be deposited and the uses for qualified withdrawals. Notably, it prohibits CCF withdrawals for purchasing fully automated cargo handling equipment if it would result in a net loss of jobs within a marine terminal, and explicitly bans the purchase of cranes manufactured in the People's Republic of China. Furthermore, the period for non-qualified withdrawals to avoid taxation is shortened from 25 years to 15 years, with a new graduated tax schedule.

To foster regional development, the bill establishes **Maritime Prosperity Zones (MPZs)**, which will be treated as qualified opportunity zones. Up to 100 census tracts can be designated as MPZs by the Maritime Administrator, in consultation with the Secretary of the Navy, if they contain or are viable sites for U.S. shipyards, ports, or harbor facilities. Investments within these zones must be in specific maritime-related industries, such as deep sea freight transportation and ship and boat building, with designations lasting five years.

Additional provisions support the maritime workforce and operations, including excluding certain maritime security payments and student incentive payments from gross income. The bill also extends existing fuel tax exemptions to vessels engaged in trade between U.S. Atlantic and Pacific ports and removes a 30-day limitation on domestic operations for certain vessels. Finally, it updates the definition of a "qualifying vessel" to include U.S.-owned foreign flag vessels under strict conditions, further aiming to bolster the domestic maritime sector.