The Short Line Railroad Tax Credit Modernization Act has been introduced by U.S. Reps. Mike Kelly of Pennsylvania and Mike Thompson of California, the Chairman and senior Democrat of the House Ways & Means Subcommittee, respectively. Its goal: to improve the railroad track maintenance credit—also known as the 45G tax credit, referring to its section in the U.S. tax code.
The legislation, H.R. 516, would “modernize” the 45G tax credit, American Short Line and Regional Railroad Association (ASLRRA) President Chuck Baker said during the Jan. 21 announcement. 45G, he noted, “has been an incredibly successful public-private partnership, responsible for more than $8 billion in infrastructure investment by the short line freight railroad industry since its inception, but outdated caps and limitations are threatening its potency.”
Enacted in 2004 and made permanent in 2020, 45G provides a credit of 40 cents for every dollar a short line invests in track and bridge improvement, up to a credit cap of $3,500 per mile. “The credit worked exactly as intended by allowing an industry that operates nearly 30% of the national freight network to bring back to life previously under-maintained low density branch lines otherwise headed for abandonment,” according to Baker, who recently covered the topic in Railway Age’s December 2024 and October 2024 issues. However, the costs to maintain and upgrade track are “significantly higher” today, he has noted, and $3,500 “doesn’t buy what it used to.”
H.R. 516 would raise the cap to $6,100 per mile.
“Short line rail service connects communities and provides rail service in small towns nationwide, including stops throughout Western Pennsylvania,“ Rep. Kelly said Jan. 21. “In some cases, short lines provide the only source for local companies to ship their products nationally. This legislation allows rail companies to continuing to provide safe and efficient service and provides a return on taxpayer investment.“
“Short line rail is critical for rural and small communities to connect to suppliers and distributors” Rep. Thompson said. “Expanding our tax credits to help ensure these rail lines are modernized and maintained just makes sense.”
Similar legislation to update 45G was introduced in the 118th Congress.
A companion bill to H.R. 516 is expected to be introduced shortly in the Senate, according to ASLRRA.
For more information on 45G and its needed update, visit the ASRLLA website, and read Baker’s recent Railway Age column, 45G: A Success Story Needing a New Chapter.
