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They've expired, but they're not completely dead. They're just in limbo.

Congress didn't extend the short-line tax credits before recessing for the holidays, so legislation governing the credits officially expired Dec. 31. However, the infrastructure funding mechanism likely will receive a new lease on life during the next few months.

Efforts to extend the tax credits will ramp up once Congress is fully up and running in time for President Bush's State of the Union address Jan. 28, says Adam Nordstrom, a partner with short-line industry lobbying firm Chambers, Conlon & Hartwell L.L.C.

"We're always in fourth gear, but we'll kick it into overdrive soon," he says.

The U.S. House returns to session on Jan. 15 and the Senate — which has been holding pro forma sessions through the holiday break to "keep the president from making recess appointments" — is tentatively scheduled to resume regular working days on Jan. 22, says Nordstrom.

Before recessing last month, Congress didn't consider an "extenders package," which would have included short-line tax credits, or Section 45G of U.S. tax code. The package — which sought to extend a number of expiring tax-related laws beyond Dec. 31 — would have extended the credits either one year per a House recommendation or two years per a Senate proposal. Because 2008 is an election year, the odds are favorable that the short line industry can soon obtain a multi-year extension, says Nordstrom.

"I would envision them doing a two-year extension," he says, adding that congressmen don't want to be approached every year for an extension. "Congress wants to get its work done early before the election."

Enacted in 2005, Section 45G enabled short lines to claim a tax credit of 50 cents for every dollar spent on infrastructure improvements, up to a cap of $3,500 per mile of owned or leased track. Through the Short Line Railroad Investment Act of 2007 (H.R. 1584/S. 881), lobbyists last year had sought to extend the credits three years, increase the mileage-based credit limitation to $4,500, minimize the Alternative Minimum Tax's impact on credits, and provide eligibility for short lines formed in 2005 and 2006.

— Jeff Stagl