Rail associations keep fingers crossed for short-line tax credit renewal

By Julie Sneider, senior associate editor

As Congress winds down its current session before year's end, some rail associations are recommending members contact their lawmakers to support legislation that would make the short-line tax credit permanent.

First passed by Congress in 2004, the credit known as Section 45G has been extended numerous times over the years but was never made permanent. It last expired Dec. 31, 2016, and was extended through 2017. Last year, the American Short Line and Regional Railroad Association (ASLRRA) began pushing for the Building Rail Access for Customers and the Economy Act (BRACE), which calls for amending the 45G tax code to remove the sunset provision and make the tax credit permanent.

Recently, U.S. Rep. Kevin Brady (R-Texas), who chairs the House Ways and Means Committee, released a proposal that would make the tax credit permanent, but the House has not yet voted on it, according to an ASLRRA spokesperson. It's unclear whether the U.S. Senate will vote on it, the spokesperson said.

Although the proposal would make the credit permanent, it would reduce the tax credit from 50 cents to 30 cents for each dollar spent up to a cap of $3,500 per mile of track owned. The credit would apply to any capital investment made after Dec. 31, 2017.

However, ASLRRA Chair Judy Petry said the association is pleased that the tax credit proposal was included in Brady's proposed bill.

"The short-line tax credit was the only 'extenders' provision recommended for permanency, reflecting the overwhelming bi-partisan support that the tax credit has had since its inception in 2005," Petry said in a prepared statement. "We are working hard to ensure that a bipartisan end-of-the-year tax package is passed by Congress."

As of Dec. 10, House Republican leadership planned to introduce two separate lame-duck tax bills; one that would include a "grab-bag of items" such as corrections to the Tax Cut and Jobs Act; and a second that could be the standalone extenders package, said National Railroad Construction and Maintenance Association Inc. President Chuck Baker in an email.

It remains unclear what the path will be for either bill, he added.

"For now, our message remains the same: We are urging all our friends in Congress to work together to pass a small end-of-the-year bipartisan tax bill that includes the short-line tax credit," Baker said. " The credit is expired and needs to be in place to allow short lines to maximize infrastructure investment."

If there's no extenders bill introduced, the rail lobby would have to "work in 2019 to get the 45G back in the tax code," Baker said in an article in the December issue of Progressive Railroading.

"We know in general that some railroads are able to invest on the bet that it'll work out, and there are others that can't," he said. "But the lack of knowing absolutely hinders investment and planning. The best solution of all would be to make [the tax credit] permanent."