Why an obscure rail tax credit should matter to truckers

— Permitting reforms

— Limits on truck size and weight

Organized by the American Short Line and Regional Railroad Association, Railroad Day on Capitol Hill saw 380 participants take 330 meetings with individual members of Congress and their staffs. Attendees ranged from single-digit mileage short lines to the largest Class I carriers, along with suppliers, engineering firms, regulators, consultants, preservationists, and others. 

Topping the agenda, the industry is asking Congress to modernize the Short Line Tax Credit, known as 45G, a critical source of funding which reimburses 40 cents of each dollar railroads invest in track, bridge and other infrastructure improvements, capped at $3,500 per mile. Created in 2005, Congress made the credit permanent in 2020, helping fuel more than $8 billion worth of investment that the trade group says has slashed derailments by 50% and helped add $56 billion in economic value. 

While strengthening the national rail network, 45G also bolsters small railroads that provide jobs in sometimes equally small communities, offering reliable funding for long-term planning while supporting supply chain connectivity across the spectrum of rail shippers. 

While ASLRRA says the credit helps promote rail as an alternative to trucks, there’s also a payoff for motor carriers likely to benefit from industrial development and expansion.

Rail executives say the tax credit hasn’t kept pace with inflation, which has pushed the per-mile cost of track upgrades to $15,000 and higher, a serious budget line item for small railroads. It also doesn’t cover track purchased since 2015. They want Congress to raise the credit cap to $6,100 as laid out by the Surface Transportation Board’s Rail Cost Adjustment Factor; index it to inflation, and allow for current track to be credit-eligible.

Bi-partisan legislation to modernize 45G has been introduced in the House of Representatives by Republican Mike Kelly of Pennsylvania and Democrat Mike Thompson of California; and in the Senate by Idaho Republican Mike Crapo and Democrat Ron Wyden of Oregon. 

The bill has attracted 260 co-sponsors with an estimated price tag of $1.5 billion over 10 years – a relative federal budgetary pittance. But like so many measures, its prospects are uncertain due to Congressional horse-trading that holds the legislative process in its grip, and some in Congress don’t see a way forward.

Not so fast, says ASLRRA President Chuck Baker, who outlined four possible paths for 45G:

— Inclusion in a bipartisan tax bill, itself held up by disagreements over healthcare funding;

— Another reconciliation bill that’s unlikely to garner the support of every Republican, unless President Donald Trump were to strongly support it;

— Inclusion in the tax title of a surface transportation bill that, while unprecedented, has the support of key leadership on transportation and tax issues, or

— Surprise legislation such as special defense appropriations or other bill to address an issue that has yet to surface.

Says Baker, “The world is full of surprises.”

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Read more articles by Stuart Chirls here.

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