Tax Policy

Our Ask:

  • Ensure that 45G and other state-level tax programs continue to drive private investment in rail.

“This credit isn’t just supported by and important to the railroads themselves, it’s also supported by the users of short line railroads who depend on them to get their products to markets around the world. The fact is this provision is far more than some sort of 'give away' to business. It’s a provision that’s important to whole communities.”

Senator Chuck Grassley, Chairman of the Senate Finance Committee, July 2019

Short lines serve the U.S. freight rail network as the first- and last-mile operators particularly in small town and rural America, handling one in five cars moving on the network annually. They are a critical connector, and serve all industries, but particularly energy, agriculture and manufacturing.

Short lines inherited track and branch lines with decades of deferred maintenance, and therefore have had to devote significant portions of revenue (average of 25% annually) to rehabilitating this infrastructure to accommodate today’s 286-pound rail needs.

railroad repair

Congress answered the call in 2005, creating the Short Line Tax Credit, known by its tax line item reference — 45G. The credit has driven over $5B in private investment since its inception. Extended by overwhelmingly bipartisan votes on six occasions, the tax credit was made permanent in December of 2020 as part of the Consolidated Appropriations Act.

It is one of the most successful examples of public-private partnerships driving infrastructure improvements.

The current credit has two limitations — it does not cover new rail built, or rail acquired post-January 1, 2015, and is limited to $3500 per mile of track — costs that have rapidly increased since 2005.

Key Takeaway:

ASLRRA urges state legislatures and DOTs to explore opportunities for infrastructure investment tax credits.

ASLRRA urges Congress to evaluate ways to maximize the impact of 45G, representing the entire short line network, and today’s costs.