The Short Line Tax Credit (45G) - It's Good Public Policy

Short lines were in business as early as the mid-1800s, but the genesis of the industry we know today was the Staggers Act of 1980, which enabled entrepreneurs to save light-density branch lines from abandonment by Class I (largest) railroads.

Short lines today operate 47,500 route miles, or 29% of the total freight miles in the U.S. The short line railroad industry touches one in five cars moving annually at origin or destination, providing first and last mile service to over 10,000 customers – particularly in rural America.

Short lines inherited track 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.

The Short Line Tax credit was first enacted by Congress in 2005. The credit, also known by its tax line item reference, 45G, has allowed short lines to privately invest over $4B since its inception. The credit has been extended by overwhelmingly bi-partisan votes on six occasions, most recently as part of the FY20 Budget Process, where it was part of HR 1865. The tax credit is currently in effect through January 1, 2023, and is anticipated to drive $200M per year in infrastructure spending.

The Call for Permanence

In the 115th Congress, the BRACE Act (H.R. 721 and S. 407), which called for permanence of the tax credit was co-sponsored by a bi-partisan majority in both houses, and was the most co-sponsored tax bill in the Senate.

On December 20, 2018, the House of Representatives passed a measure that would make the tax credit permanent.

In the 116th Congress, the BRACE Act (H.R. 510 and S. 203) have been introduced, and call for permanence of the Credit. These bills each have a record-breaking number of bi-partisan co-sponsors.

In July of 2019, the U.S. Senate Finance Committee released taskforce reports that examined more than 40 temporary tax provisions that expired between December 31, 2017 and December 31, 2019. The Business Cost Recovery Task Force evaluated six tax credits including the Short Line Tax Credit (45G).  In their introduction of the report, Task Force Co-Leads Senator Mike Crapo (R-ID) and Senator Ben Cardin (D-MD) stated, “two in particular have proven on their merits to receive a permanent extension – Section 45G and Section 179D.”

Short Line Tax Credit Brief   Short Line Success Stories


Sponsors of Section 45G Permanency Legislation in the 116th Congress
 Sponsors of S. 203 by State  Sponsors of H.R. 510 by State  Sponsors of H.R. 510 by District