The 45G tax credit has been extended until Jan. 1, 2014, as part of the "fiscal cliff" deal passed in the Senate and then in the House of Representatives. The credit is retroactive and applies to expenditures paid or incurred in taxable years beginning after Dec. 31, 2011.
The tax credit was originally enacted in 2004 and creates an incentive for shortline and regional railroads to invest in track rehabilitation and improvements by providing a tax credit of 50 cents per dollar spent on those improvements. Prior to the current deal, the credit, which is capped based on a mileage formula, expired on December 31, 2011.
Richard F. Timmons, president of the American Short Line and Regional Railroad Association issued a statement saying in part, "Shortline railroading is one of the most capital intensive industries in America. Shortlines operate almost 50,000 miles of track and preserve the first and last mile connection to factories, grain elevators, power plants, refineries and mines that employ over 1 million Americans. While competing highway infrastructure is maintained by federal and state governments, shortline infrastructure is preserved by small companies. The 45G credit allows small railroads to improve railroad infrastructure that benefits the public by using more of what they earn, rather than giving it to the government.
"This investment keeps millions of additional heavy trucks off of the publically maintained highways each year, reducing wear and tear, pollution and congestion and preserves jobs and economic development opportunities. Section 45G allows the market, not government bureaucrats, to prioritize infrastructure investment decisions. The Railway Tie Association estimates that when the 45G credit is in effect, between 500,000 and 1,500,000 additional railroad ties are installed each year. These steel rails and wooden ties are made in America with pride and are investments that cannot be outsourced abroad.
"The 45G success story is the story of reducing federal taxes and interference with small businesses and allowing those businesses to invest more of what they earn in ways that benefit all Americans."