Tonnage tax scheme abuse triggers written exclusion after notice, approval, and assessment of bona fide commercial purpose.

Section 234 prevents application of the tonnage tax scheme where a tonnage tax company enters into an abusive transaction or arrangement producing a tax advantage for another person or its non-tonnage tax activities. Tax advantage includes improper expense, interest, or cost allocation that reduces taxable income or increases losses outside the scheme, and excessive profits from tonnage tax activities. Exclusion requires a written order, show-cause notice, and prior approval, subject to protection for bona fide commercial transactions not entered into for obtaining a tax advantage.

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