The tax credit many small-business railroads depend on to help fund capital improvements has gotten a potential boost in Congress.
Bills introduced in both the Senate and House of Representatives would modify the Railroad Track Maintenance Credit, updating the credit for inflation and allowing expenditures on short-line track that has been acquired since 2015 to be included.
Known as 45G, the tax credit has been a key incentive for short lines to invest more of their own funds for upgrading track and bridges, and deploying technology to modern standards.
“This game-changing policy has been responsible for more than $8 billion in investment to date, but outdated caps and limitations are threatening to erode its potency,” said Chuck Baker, president of the American Short Line and Regional Railroad Association (ASLRRA). He said updates to the credit “will serve the rail industry, shippers, and the economies of small towns across the country for years to come.”
The nation’s 600 short-line railroads operate one-third of the rail system by mileage, and are the first or last mile for one in five rail cars moving through the system, ASLRRA said, adding the tax credit upgrade ensures that more than 10,000 shippers have access to U.S. and foreign markets.
The tax credit, which Congress made permanent in 2020, currently allows a 40-cent tax credit for each dollar invested in upgrading rail and bridges, up to a cap of $3,500 per mile of rail. ASLRRA called it “an effective and successful public policy.”
But expenditures on rail that became short-line track after 2015 are ineligible for the credit, and, over time, the cost to rehabilitate a mile of track has increased significantly. The legislation wants to raise the cap per mile to $6,100, index the cost to inflation going forward and allow expenditures on all short-line-owned track to be eligible for the tax credit.
The bill’s authors are longtime backers of 45G. Sens. Ron Wyden, D-Ore., and Mike Crapo, R-Idaho, and Reps. Mike Kelly, R-Pa., and Earl Blumenauer, D-Ore., on Tuesday introduced the bills, S. 5008 and H.R. 9522.
Wyden is chair of the Senate Finance Committee, and Crapo is ranking member. Kelly and Blumenauer are both members of the House Ways and Means Committee.
Stephen Webster
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