Support Building for Short Line Tax Credit

The short line railroad industry is hopeful for a Congressional extension by year's end of its infrastructure tax credit.

In a press briefing this week in Washington, lobbyists for and leaders of the American Short Line and Regional Railroad Association (ASLRRA) announced that their national effort to extend the railroad track maintenance tax credit had won support from a majority of members in both the House of Representatives and the Senate.

"This marks the first time that the short line industry has had a majority of both houses support the bill," noted Ed McKechnie, chief commercial officer of short line operator Watco Companies Inc. McKechnie serves as chairman of the ASLRRA's Legislative Policy Committee.

Some 240 members of the House and 51 Senators have signed on as official co-sponsors of the bill. H.R. 1132 and its companion in the Senate, S. 461, would extend the railroad track maintenance credit, known as the Section 45G credit, for an additional three years beyond the current scheduled expiration of the end of this year. The credit currently allows railroads to claim a 50-percent tax credit on qualified railroad track maintenance expenditures, with credits capped at a sum determined by multiplying the number of total track miles and $3,500. The credit helps support over $330 million in rail infrastructure improvements annually with a federal revenue cost of about $165 million per year.

Short line interests are pushing Congress to include their tax credit in a draft broad tax extender's bill before the end of this month. If that happens, it will likely only be a one-year extension of the measure, not the three year or longer that the industry had targeted.

While the industry would be content with a single-year extension, it would prefer to see its tax credit become a more permanent one but that's difficult in this political and fiscal environment. Short line leaders said they would begin conversations next spring in hopes of having the credit included in the six-year reauthorization of the surface transportation funding bill.

"The tax credit works and members of Congress know it works. Wherever you go across the U.S., you are going to see evidence and examples of it working," McKechnie said. The credit is mostly used to replace aging rail, insert new rail ties and new ballast, and repair or upgrade bridges.

The industry will see immediate new orders for ties, ballast, and rail once the tax credit is extended.  "As soon as it passes, I can guarantee you that there will be purchasing officers ordering rail ties literally the next day," McKechnie said. "It will be an absolutely immediate thing and that's why it's so important that it be done before the construction season starts."

The railway tie industry believes that the tax credit has resulted in an additional 750,000 ties annually purchased just as a result of the tax credit, said Keith Hartwell, president of Chambers, Conlon & Hartwell, the D.C.-based lobbying firm that represents ASLRRA.

Rep. Earl Pomeroy (D-ND) is the lead sponsor of H.R. 1132 and has partnered with Rep. Jerry Moran (R-KS) to push for railroad infrastructure improvement. Sen. Blanche Lincoln (D-AR) is the lead sponsor of S. 461 and is joined by Sen. Mike Crapo (R-ID) in reauthorizing the tax credit.

"The entire short line rail community and the thousands of short line rail customers supporting this effort are grateful to these four leaders of the House and Senate and to the strong majority of their colleagues who recognize the economic, environmental, and highway safety benefits of moving freight by rail," said ASLRRA President Rich Timmons.