Short Line Tax Credit Modernization Bill Gains Momentum

Short lines and regional railroads of the U.S.

ASLRRA map

WASHINGTON, D.C. - H.R. 516 and S. 1532 bills are gaining support in Congress.

Both bills would modernize the Section 45G Railroad Track Maintenance Credit, also known as the 45G tax credit. It is focused on bringing track and bridges to modern standards and allowing short lines to keep these feeder lines in small town and rural America viable, ASLRRA says. Currently, the tax credit allows for a $.40 tax credit every dollar invested in short line track upgrades up to $3,500 per mile. However with inflation, the cost to rehabilitate a mile of track has increased. ASLRRA says the legislation will increase the per mile cap from $3,500 to $6,100, index the cost to inflation going forward, and allow expenditures on short line track to be eligible for the tax credit.

ASLRRA President Chuck Baker said, “The 45G Railroad Track Maintenance Credit has been crucial to short line success for over 20 years. It allows short lines to put more of their own funds to work – to the tune of more than $8 billion to date. However, if the credit doesn’t keep pace with the economic realities and the cost of upgrading track, small railroads will struggle to maintain infrastructure, which would ripple out to shippers, local businesses, and regional economies. . . H.R. 516 and S. 1532 correct two policy gaps – allowing for an adjustment for inflation going forward, and the inclusion of all current short line miles.”

Both bills are gaining momentum in Congress. According to the ASLRRA, six states have full House of Representative delegations as cosponsors with another ten states having both Senators as cosponsors. Arkansas, Kansas, Mississippi, and North Dakota have 100% of their Congressional delegations on the bill as cosponsors.

H.R. 516

As one of only three bills in the House of Representatives in the 119th Congress that has at least 120 cosponsors and 40 or more from each major political party, H.R. 516 has 130 cosponsors, placing it among the top 2% of cosponsored tax bills. The House Ways & Means Committee initiatives a tax bill, and the House Transportation & Infrastructure Committee has a broad jurisdiction over matters concerning transportation. Both Committees have more than half of its members as cosponsors of H.R. 516.

S. 1532

In the Senate, more than half of members of the Senate Finance Committee, a committee on tax, and the Senate Commerce Committees, a committee with rail jurisdiction, are cosponsoring S. 1532. Lead sponsors of the bill are Senate Finance Committee Chairman Mike Crapo (R-ID) and Ranking Member Ron Wyden (D-OR).

“Short line and regional railroads are not just a mode of transportation, but they are also a vital economic tool that connects local businesses with Oregonians and other people all across the nation. For years, Senator Crapo and I worked together to make railroad tax credits permanent, and the next step is to make these tax credits better for our operators. Our bipartisan bill will provide railroads with much needed resources to make vital upgrades that will bring our rural, suburban and urban communities and their local economies together,” said Senator Wyden.

“Short line railroads are critical infrastructure that connect Idaho’s farmers, ranchers and manufacturers to national and global markets, supporting local jobs and driving economic growth in rural Idaho.  Modernizing the Short Line Railroad Tax Credit will provide railroads with necessary certainty and resources to invest in safety, efficiency and long-term infrastructure improvements in our regional areas,” said Senator Crapo.

H.R. 516 and S. 1532 Sponsor Lists

According to the release, the Joint Committee on Taxation (JCT) of Congress also helped to build momentum for the bills when it gave an official score in a letter to the House Ways & Means Tax Subcommittee Chairman Mike Kelly. The score includes an average $179 million per year over 11 years (2025-2035 budget window), with a total score of $1.97 billion.

ASLRRA says upgrading track to modern standards is important and necessary for two reasons. The first of which is that it makes for a “seamless, resilient, national freight network which benefits America’s economy.” Secondly, it addresses the two common causes of derailments on short lines, which are broken rail and wide gauge.