• ITVI.USA
    14,255.530
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  • OTRI.USA
    22.660
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  • OTVI.USA
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  • TLT.USA
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  • TSTOPVRPM.ATLPHL
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  • TSTOPVRPM.LAXDAL
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  • TSTOPVRPM.PHLCHI
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  • TSTOPVRPM.LAXSEA
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  • WAIT.USA
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    0.000
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  • ITVI.USA
    14,255.530
    -14.610
    -0.1%
  • OTRI.USA
    22.660
    0.190
    0.8%
  • OTVI.USA
    14,245.400
    -13.510
    -0.1%
  • TLT.USA
    2.780
    -0.010
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  • TSTOPVRPM.ATLPHL
    2.650
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  • TSTOPVRPM.CHIATL
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  • TSTOPVRPM.DALLAX
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  • TSTOPVRPM.LAXDAL
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NewsRail

Short line tax credit could become permanent

45G tax credit ensures short line track investment, proponents say

The U.S. freight rail industry is hopeful that a temporary federal incentive that encourages short line railroads to make capital investments will become permanent.

Within the $1.4 trillion fiscal year 2021 appropriations bill that Congress passed, there is a provision that would make permanent the short line tax credit. The credit, also known as the 45G tax credit in reference to the U.S. tax code, provides short lines with up to $3,500 per short line railroad mile to invest in infrastructure improvements.

“We applaud Congress for their bi-partisan bi-cameral action to make the effective and popular Short Line Tax Credit permanent,” said Chuck Baker, president of the American Short Line and Regional Railroads (ASLRRA), in a statement. “With the passage of this bill, our mission to connect rural and small town America to larger domestic and global markets in a safe, efficient, and environmentally friendly way is set to receive a significant boost. Creating long-term tax certainty will enable small business railroads to meet customer needs throughout the country, particularly in the energy, agriculture and manufacturing industries, immediately and far into the future.”

The tax credit was first introduced in 2005, and since then, the industry has invested more than $5 billion to date to improve, upgrade and maintain lines.

But the credit was temporary, although short line stakeholders and the freight rail industry have lobbied for years to make it permanent. 

The language in this bill calls for the tax credit to remain at the current $3,500-per-mile limit indefinitely, with the rate of the credit at the current 50% for 2020, 2021 and 2022 and then adjusting to 40% beginning in 2023, according to ASLRRA. Current tax code calls for the railroad track maintenance tax credit to be an amount equal to 50% of the qualified railroad track maintenance expenditures for an eligible taxpayer.

“With permanency of the 45G tax credit, the bill provides much needed support to short line railroads, many of whom are family-owned and operated, who have struggled to keep people employed in small localities across the nation during the COVID-19 pandemic while rising to the occasion to deliver reliable transportation as part of the nation’s critical workforce,” Baker said.

Meanwhile, the Association of American Railroads (AAR) also praised the inclusion of the short line tax credit, saying that the credit incentivizes smaller railroads to invest in track rehabilitation. 

“The freight railroad industry is pleased to see Congress reach agreement on much-needed legislation and is especially grateful that lawmakers made the successful short line infrastructure tax credit permanent … . Cementing the credit provides certainty and will bolster investment in the roughly 600 U.S. short line railroads — a positive first step for policymakers keen on improving U.S. infrastructure and achieving various policy goals through rail transportation,” said AAR President Ian Jefferies.

AAR also supported the inclusion of two other rail-related provisions: the continued assistance under Railroad Unemployment Insurance and the reauthorization of the Diesel Emissions Reduction Act through fiscal year 2024.

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Click here for more FreightWaves articles by Joanna Marsh.

Related articles:

Port expansion included in giant federal spending package

US DOT revamps loan program for short line railroads

Short lines group celebrates Congressional support of tax credit

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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