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NewsRail

Bipartisan legislators unveil bill aimed at helping railcar manufacturers

Trade group Railway Supply Institute supports the bill

A bipartisan group of congressional legislators has introduced a bill that would provide a temporary tax credit to railcar manufacturers that have been hit hard by pandemic-induced, adverse market conditions.

The Freight Rail Assistance & Investment to Launch Coronavirus-era Activity & Recovery Act, or Freight RAILCAR Act, seeks to provide a 50% tax credit for new railcars or for the modification of existing railcars to help offset costs, according to the representatives. The tax credit would expire on Dec. 31, 2024, for most conditions.

The bill comes as railcar manufacturers have been seeking relief from the pandemic-induced drop in rail volumes and a market environment that has encouraged shippers and the freight railroads to put their assets in storage.

The congressional legislators who introduced the bill were Reps. Brad Schneider, D-Ill.; Darin LaHood, R-Ill.; Dan Lipinski, D-Ill.; Rick Crawford, R-Ark.; Earl Blumenauer, D-Ore.; and Drew Ferguson, R-Ga. 

These leaders also represent states that have either the headquarters, facilities or an office of manufacturers Greenbrier (NYSE: GBX), GATX (NYSE: GATX), Trinity Industries (NYSE: TRN) and FreightCar America (NASDAQ: RAIL).

“Rail is integral to our state’s — and our nation’s — economy,” Schneider said. “As this industry faces historic downturn amid the current economic uncertainty, our bipartisan legislation would help modernize its fleet while spurring economic demand, on top of environmental and public safety benefits.”

Specifically, the bill would enable railcar owners to:

  • Replace two existing railcars with a new railcar that improves the fuel efficiency or capacity by at least 8%.
  • Upgrade, refurbish or modernize existing tank cars to DOT-117 tank car specifications. 
  • Refurbish or modernize an existing railcar to improve fuel efficiency or capacity by at least 8%.
  • Provide a separate tax credit for the scrapping of a railcar based on the depreciated value of that particular asset. 
  • Provide a time-limited 50% tax credit for capital expenditures on equipment or technology enhancements in railcar-related manufacturing or repair shops if that equipment: (a) improves the implementation of enhanced controls to meet environmental standards, including emissions limits under the Clean Air Act or (b) improves the efficiency, quality or safety of railcar or railcar component manufacturing, repair and modernization operations. This credit would expire on Dec. 31, 2023.

“The railway supply industry is an economic engine for my district and the Chicago region,” Lipinski said. “With so many people suffering at the moment, now’s the time for Congress to work to stimulate this critical industry. Too many essential goods and services — and tens of thousands of good-paying manufacturing jobs are at stake. As chair of the Rail Subcommittee, I have proudly worked with members of both parties to protect American infrastructure and American jobs. This important legislation continues that fight.”

The legislators also say this bill would cut anywhere between 3.3 million tons and 13.2 million tons of CO2 emissions over 20 years depending on whether the railcars are covered hoppers, double stack cars or autorack railcars. 

The Railway Supply Institute expressed its support of the bill, saying that the tax credit would encourage freight railcar owners to modernize their fleets to better meet precision scheduled railroading standards, accelerate the production of new tank cars to meet improved safety standards and increase the efficiency of the fleet through energy-efficient freight railcars.

“The Freight RAILCAR Act will help incentivize private investment in the freight railcar manufacturing industry to preserve thousands of American jobs, reduce our carbon footprint and ensure the integrity of our critical rail supply chains,” said Nicole Brewin, RSI’s senior vice president of government and public affairs. “Railway suppliers are facing increasingly difficult economic circumstances as a result of the COVID-19 pandemic and many have been forced to significantly reduce their manufacturing workforces.”

RSI calculated that railcar deliveries totaled 8,441 in the second quarter of 2020, plummeting 46% from the second quarter of 2019 and falling 22% from the first quarter of 2020.

(Graph: Railway Supply Institute)

Although railcar manufacturers have discussed tax credits under other similar situations, such as the Great Recession over a decade ago, the precipitous rate of the market downturn that occurred in 2020 prompted action.

The rail manufacturing industry has also said that support of U.S. railcar manufacturers ensures that freight and passenger rail assets don’t come from foreign, state-owned enterprises. 

Click here for more FreightWaves articles by Joanna Marsh.

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Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.
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