Short Line Tax Credit Extension

H.R. 721 and S. 672
Extension of the Section 45G Railroad Track Maintenance Credit

Jenkins-Blumenauer, Rockefeller-Crapo Legislation 

Rep. Lynn Jenkins (R-KS) along with Rep. Earl Blumenauer (D-OR), Bill Shuster (R-PA), and Jerry Costello (D-IL), have introduced legislation (H.R. 721) to extend the Section 45G short line railroad tax credit. Sen. John Rockefeller (D-WV) along with Sen. Mike Crapo (R-ID) will introduce a companion bill in the Senate.  Originally enacted in 2004, Section 45G creates a strong incentive for short line railroads to invest private sector dollars on freight railroad track rehabilitation and improvements.  The credit, which is capped based on a mileage formula, expired on December 31, 2011. American Short Line and Regional Railroad Association members encourage Members of Congress to unite in support of legislation to extend this important credit.

Objectives of the Legislation

Section 45G creates an incentive for short line railroads to invest in track rehabilitation by providing a tax credit of 50 cents for every dollar the railroad spends on track improvements. The credit is capped based on a mileage formula. H.R. 721 and the Senate companion propose the following: 

• Extend 45G - Section 45G expired on December 31, 2011.  This bill extends the provision through 2017 to provide important long-term planning certainty necessary to maximize private-sector transportation infrastructure investment. 
• Allow eligibility for new short line railroads created after January 1, 2005 and before January 1, 2011 - Congress should allow 45G credits to be earned from investments made to track purchased by or built by short line railroads after January 1, 2005.  Congress originally created a cutoff date of January 1, 2005 to avoid the creation of an incentive for large railroads to increase line sales.  Since 2004, new short line railroads have been created, and several short lines have constructed new track to provide freight rail service to new rail customers.  Expenses to maintain these lines should qualify.  A cutoff date of January 1, 2011 is imposed to prevent the distortion of the economics of future line sales and to cap the score at a known number.

The bill text referenced above is nearly identical to H.R. 1132 / S.461 co-sponsored by 261 Representatives and 53 Senator in the 111th Congress. H.R. 721 omits a more costly a provision to increase the credit cap that was included in H.R. 1132. A straight extension of current law is scored at $165.5 million per year extended.

Text of Legislation

SECTION 1. SHORT TITLE

            This Act may be cited as the 'Short Line Railroad Rehabilitation and Investment Act of 2011'.

SECTION 2. EXTENSION AND MODIFICATION OF RAILROAD TRACK MAINTENANCE CREDIT.

      (a) Extension of Credit- Section 45G(f) of the Internal Revenue Code of 1986 is amended by striking 'January 1, 2012' and inserting 'January 1, 2018'.

      (b) Expenditures- Subsection (d) of section 45G of the Internal Revenue Code of 1986 (relating to qualified railroad track maintenance expenditures) is amended by striking 'for maintaining' and all that follows and inserting 'for maintaining--

                  '(A) in the case of taxable years beginning after December 31, 2004, and before January 1, 2012, railroad track (including roadbed, bridges, and related track structures) owned or leased as of January 1, 2005, by a Class II or Class III railroad (determined without regard to any consideration for such expenditures given by the Class II or Class III railroad which made the assignment of such track), and

                  '(B) in the case of taxable years beginning after December 31, 2011, railroad track (including roadbed, bridges, and related track structures) owned or leased as of January 1, 2011, by a Class II or Class III railroad (determined without regard to any consideration for such expenditures given by the Class II or Class III railroad which made the assignment of such track).'.

      (c) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2011.

How to Co-Sponsor

House Co-Sponsors - To co-sponsor H.R. 721, contact:

Colin Brainard, Office of Rep. Lynn Jenkins (R-KS), at Colin.Brainard@mail.house.gov or 225-6601; or,
David Skillman, Office of Rep. Earl Blumenauer (D-OR) at David.Skillman@mail.house.gov or 225-4811. 

Senate Co-Sponsors - To co-sponsor S. 672, contact:

Mark Libell, Office of Sen. John Rockefeller (D-WV), at Mark_Libell@rockefeller.senate.gov or 224-6472; or,
Rachel Johnson, Office of Sen. Crapo (R-ID), at Rachel_Johnson@crapo.senate.gov or 224-6142.

To view a map of co-sponsors of H.R. 721 by state, click the thumbnail below.

To view a map of co-sponsors of H.R. 721 by district, click the thumbnail below.

To view a map of co-sponsors of S. 672 by state, click the thumbnail below.

The Case for Short Line Railroads

Over 550 short line railroads preserve nearly 50,000 miles of track that otherwise would have been abandoned by the large Class I railroads.  This track received little investment by its previous Class I owners and must be upgraded and maintained if over 10,000 rail customers are to stay connected to the national main line rail network.   These freight rail connections are critical to preserving the first and last mile of connectivity to factories, grain elevators, power plants, refineries, mines, and transload facilities that employ over 1 million Americans.  While highway infrastructure is maintained by federal and state governments, freight rail infrastructure is maintained by private sector investments.

Short lines use approximately 184 million gallons of fuel to move 10.6 million carloads of freight annually.  Trucks would require 540 million gallons to move the same freight.  Short lines save shippers 20% to 50% over comparable truck transportation. Short lines keep 30 million truckloads/year off the highway, saving $1.3 billion per year in highway damage costs. To view successful projects that have been undertaken because of the short line tax credit, click the picture below.

At the 2009 ASLRRA Annual Convention in Las Vegas, ASLRRA representatives recorded the reactions of key ASLRRA members to the importance of extending the Section 45G Railroad Track Maintenance Credit. To view the composite video, click the image below. 

Below is a list of H.R. 721 and S. 672 supporting documentation:

• Section 45G Talking Points - High points for you to hit during meetings with congresspeople or staffers.
• Section 45G Extension White Paper - A two page document that explains the changes contained in H.R. 721.
• Section 45G as Currently Enacted - Document showing the legislative history and relevant statutory text of 26 USC 45G.  Note:  Not for tax or IRS compliance purposes.  Seek professional tax advice before taking a tax position.
• Section 45G Success Stories - Before and after photos showing dozens of examples of 45G benefits across America.
• Customer Success Stories - A document providing brief success stories and endorsements of Section 45G from short line railroad customers.
• 2010 Co-Sponsors of S. 461 and H.R. 1132  - A final list of co-sponsors.
• 2007 and 2008 Co-sponsors of S. 881 and H.R. 1584 - A final list of co-sponsors.
• 2003 and 2004 Co-sponsors of S. 1703 and H.R. 876 - These Members of Congress supported the enactment of Section 45G in 2003 and 2004.
• Various Congresspersons have issued statements, pledging support to the extension of section 45G. To view the text of these various statements, click on the Congressperson's name below.

Congressman Jerry Moran (R, KS-1)
Congressman Aaron Schock (R, IL-18)
Congressman Jerry F. Costello (D, IL-12)
Congresswoman Lynn Jenkins (R, KS-2)
Congressman Michael H. Michaud (D, ME-2)
Congressman Daniel Lipinski (D, IL-3)

For more information please contact ASLRRA Washington Representatives adam.nordstrom@cch-llc.com;
keith.hartwell@cch-llc.com; jeff.vanschaick@cch-llc.com; or chris.johnson@cch-llc.com at 202-638-7790.