Rail Infrastructure & Capacity Investment

RSI is dedicated to advancing rail as part of a balanced approach to transportation policy. Investing in rail will ensure competitiveness, promote job creation and improve our nation’s mobility. Federal tax incentives for investments in new track, bridges, tunnels, as well as for investments in federal mandated positive train control systems can help achieve this goal. To help bridge the funding gap between private investment, Congress should enact legislation which provides tax incentives for projects that expand freight rail capacity. The U.S. Department of Commerce estimates that every $1 billion invested in rail directly creates 20,000 jobs.

Possible Tax Incentives in the 113th Congress

On January 3, 2013, the President signed the “fiscal cliff” bill which included a wide variety of tax and other measures including the short line railroad Section 45G tax credit (section 306) which was extended retroactively from January 1, 2012 through December 31, 2013.

On February 14, 2013, Reps. Lynn Jenkins (R-KS) and Earl Blumenauer (D-OR) introduced H.R. 721, the Short Line Railroad Rehabilitation and Investment Act of 2013. H.R. 721 would extend the current credit through December 31, 2016. The bill further proposes allowing new short line railroads created after January 1, 2005 and before January 1, 2013 to be eligible to claim the tax credit.  Finally, the credit cap would remain as it is currently at $3,500 per mile. The bill was referred to the House Ways And Means Committee where it is pending consideration.

A companion bill, S. 411 was introduced in the Senate on February 28th by Sen. John Rockefeller (D-WV).  S. 411 was referred to the Senate Committee on Finance where it is pending consideration.

Originally enacted in 2004, Section 45G creates a strong incentive for short line railroads to invest private sector dollars on freight railroad track rehabilitation.

RSI Proposed Tax Incentives in the 111th Congress

Green Railcar Enhancement Act of 2010: On June 9, 2010, Congressmen Earl Blumenauer (D-OR-3), Kevin Brady (R-TX-8), Bill Shuster (R-PA-9) and John Tanner (D-TN8) introduced House Bill 5478 (H.R. 5478) , the Green Railcar Enhancement Act of 2010. This bill would provide a 25 percent tax credit for replacing or rebuilding old, inefficient railcars. The tax credit will be limited to cars built in 2010 and 2011 and would require a minimum of 8% increase in capacity or fuel efficiency

Freight Rail Infrastructure Capacity Expansion Act of 2008: The Freight Rail Infrastructure Capacity Expansion Act of 2008 or H.R. 1806 would provide a 25 percent tax credit for investments in new rail track, intermodal facilities, rail yards, locomotives or other rail infrastructure expansion projects. All businesses, including railroads, ports, shippers, trucking companies would be eligible for the credit. Examples of qualifying capacity-expanding investments include adding new track to existing right of ways; adding or extending new sidings or spurs to existing right of ways; constructing new intermodal or transload facilities; and new technology-based expansion, including signaling in dark territory. New locomotives would qualify only if they increased the total horsepower of a carrier’s locomotive fleet. Finally, all freight rail infrastructure capital expenditures would be eligible for expensing treatment.

H.R. 1806 was referred to the House Committee on Ways and Means. A companion bill, S. 3749 was introduced in the Senate by Senator Kent Conrad (D-ND).