Reps. Kelly, Thompson introduce bill to update 45G railroad tax credit

U.S. Reps. Mike Kelly (R-Pa.) and Mike Thompson (D-Calif.) yesterday introduced legislation that would increase the tax credit incentive for short lines and regionals to invest in rail infrastructure improvements.

Under the proposed Short Line Railroad Tax Credit Modernization Act, short lines and regionals would be allowed to take a tax credit of 40 cents for each dollar they spend on track upgrades, bridge improvements or technology deployments, capped at $6,100 per mile. The legislation would increase the cap from the current $3,500.

More commonly known as Section 45G of the Internal Revenue Service Code, the tax credit makes it easier for smaller railroads to maintain rail infrastructure in a state of good repair. It was made permanent in 2020, but it needs to be updated to address rising costs, short-line industry representatives say.

 “The 45G tax credit has been an incredibly successful public-private partnership, responsible for more than $8 billion in infrastructure investment by the short-line freight railroad industry since its inception, but outdated caps and limitations are threatening its potency,” said Chuck Baker, president of the American Short Line and Regional Railroad Association, in a press release issued by Kelly's office.

A similar bill was introduced but not adopted by the last Congress.

Short lines provide rail service in small towns nationwide, noted Kelly. 

"In some cases, short lines provide the only source for local companies to ship their products nationally," Kelly said. "This legislation allows rail companies to continuing to provide safe and efficient service and provides a return on taxpayer investment."

Kelly chairs the House Ways and Means Subcommittee on Tax; Thompson is the subcommittee's ranking member.

The new bill can be read here.