advocacy

Tax Policy

 Ask:

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

“Short line and regional railroads are an essential part of our infrastructure and a lifeline that connects small businesses with consumers in markets all over the country. Senator Crapo and I worked for years to make the tax credit for these railroads permanent, and the next step is to improve it to meet the needs of our businesses and communities today.

Our bipartisan legislation will deliver much-needed relief for short line and regional railroads to make vital upgrades that connect our rural communities, small towns, and urban centers to the marketplace.”

Senator Ron Wyden, Chairman of the Senate Finance Committee, 2024

ASLRRA Calls on Congress to Update the Railroad Maintenance Tax Credit

ASLRRA has called on past champions of the 45G Tax Credit to assist in modernizing the credit.  45G has enabled the nation’s 600 short line railroads to address the leading cause of derailments – worn out, and outdated track.

On September 10, 2024, H.R. 9522 and S. 5008 were introduced, modifying the credit in three ways:

  1. Update the credit based on inflation: the credit cap has been frozen at $3,500/mile since 2005. Inflationary pressure has diminished its impact. The credit cap will be updated to $6,100/mile.
  2. Indexed the credit to inflation, so that future investment dollars can keep up with cost increases in labor and materials.
  3. Allows for all short line-owned track miles to be eligible for the credit. Currently, only track owned by short lines in 2015 is eligible. Since that time, many short lines have acquired additional track from Class Is, and new short line operations have been formed.

45G History

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 standard rail cars that legally can carry up to 286,000 pounds of freight.

railroad repair

Congress answered the call in 2005, creating the Railroad Maintenance Tax Credit, known by its tax line item reference. "45G," in the Internal Revenue Code of 1986, Title 26. The credit has driven over $8B 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.

45G has been an extraordinary public policy success story, allowing privately held railroads to invest more of their own resources in maintaining and improving critical national infrastructure, serving thousands of shippers and ensuring the safety of their employees.

Federal Railroad Administration data has shown that since the inception of the 45G Tax Credit, train derailments on short line railroads have declined by 50 percent, linking improved rail to improved safety.

* PwC, The Section 45G Tax Credit and the Economic Contribution of the Short Line Railroad Industry, 2018.

“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

Key Takeaway:

ASLRRA urges Congress to pass S. 5008 and H.R.9522, maximizing the impact of 45G, by including all short line track miles, and reflecting today's costs.

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