Legislation to make 45G tax credit permanent re-enters House

A bill that would make the shortline maintenance tax credit permanent was introduced to the House of Representatives during the evening of Jan. 30.

The Building Rail Access for Customers and the Economy (BRACE) Act, H.R. 721, would permanently extend the 50-cent tax credit, also known as 45G, shortline and regional railroads can claim for each dollar spent on track improvements up to $3,500 per mile of track owned or leased by the railroad.

The tax credit has been active since 2004, going through a series of five short-term extensions-many times being extended retroactively. The most recent extension of the credit expired Dec. 31, 2016. In 2016, the BRACE Act was introduced to make the credit permanent and received a majority of sponsors in both the House and Senate during the 114th Congress. Representatives Lynn Jenkins (R-KS), Earl Blumenauer (D-OR), Rodney Davis (R-IL) and Dan Lipinski (D-IL) introduced the bill to the House during the 115th Congress.

“Small business freight railroads connect Kansas’ rural communities to markets across the United States and beyond. This measure will allow short line railroads to make long-term plans for infrastructure repairs and upgrades, keeping local jobs and helping small town businesses grow,” said Rep. Lynn Jenkins. “This legislation will ensure that small freight railroads will have the confidence to continue to invest for growth over the long term, providing safer and more efficient transportation.”

“The 45G tax credit for freight infrastructure improvement and development has been a bi-partisan solution, ensuring that U.S. goods flow from towns and industries across America to U.S. markets, and beyond,” said Linda Bauer Darr, president of the American Short Line and Regional Railroad Association (ASLRRA). “The BRACE Act allows for our small railroads to avoid the uncertainty of extending deadlines, ensuring that investment will be continuous. The BRACE Act will of course aid our small railroads, but much more importantly directly support the more than 10,000 customers along our lines and the suppliers to our industry.”

ASLRRA says the tax credit has enabled shortline railroads to increase their infrastructure investment by 180 percent from its inception in 2004 through 2015. The association notes the capital-intensive nature of the industry and says 45G has been instrumental in allowing shortlines to invest a large percentage of their earnings (24 to 35 percent) in track and bridge rehabilitation.

Citing a survey of its members, ASLRRA says the shortline industry’s overall annual federal tax liability has increased by 64 percent since 2003, the year prior to the credit being enacted.

“45G leverages private capital to promote even further investments, amounting to more than $2 billion dollars since 2004, helping short line railroads improve their track and bridges quicker than otherwise would be possible. This is truly a private solution to a public problem spurring on local economies across the country that had suffered with inadequate freight transportation infrastructure,” said Jerry Vest, chairman of ASLRRA’s Legislative Policy Committee. “It is proven to work. The tax credit works across all types of railroad ownerships, from those incorporated to the smallest railroads that are part of the owner’s tax filing.”

“We thank Congressmen Jenkins, Blumenauer, Davis and Lipinski for their bipartisan leadership and recognition of the critical role small railroads play in providing efficient transportation options to communities and manufacturers,” said Judy Petry, Chair of ASLRRA. “The BRACE Act will allow railroads to self-fund a comprehensive plan for track and other improvements far into the future, making operations ever safer and more efficient.”