Railroad Track Maintenance Tax Credit

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The Railroad Track Maintenance Tax Credit, also known as the 45G Tax Credit, is a federal income tax credit for track maintenance conducted by short lines and regional railroads in the United States. The credit granted an amount equal to 50 percent of qualified track maintenance expenditures and other qualifying railroad infrastructure projects. It was inserted into the tax code by the American Jobs Creation Act of 2004, and was taken into effect on January 1, 2005 with an expiration date of December 31, 2009. Following the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, signed into law on December 17, 2010, the tax credit was retroactively extended for 2010 and the expiration date moved to January 1, 2012. [1] United States fiscal cliff legislation retroactively reinstated the tax credit for 2012 when signed into law January 2, 2013. The tax credit is effective through December 31, 2022. [2]

Contents

Background

Bonded main line 6-bolt rail joint on a segment of 155 lb/yd (76.9 kg/m) rail. THORN-155lb-PS-jointed-joint.jpg
Bonded main line 6-bolt rail joint on a segment of 155 lb/yd (76.9 kg/m) rail.

In the United States, short line and regional railroads grew exponentially following railroad deregulation in 1980. By 2005 there were more than 500 railroads of this nature, serving small and mid-sized towns that otherwise would have lost rail service. These railroads were responsible for supporting more than 11,000 industrial sites, making them critically important to the local economies of the regions they serve. [3] Maintenance costs for rail infrastructure is often expensive and difficult for low income railroads to cover, as a result some railroads partnered with the companies they served in order to fund maintenance. In order to assist the railroads with maintaining their infrastructure, the Railroad Track Maintenance Tax Credit was created. With more than $330 million in shortline infrastructure investment made annually, credits of $165 million would be placed back in the hands of the railroads and shippers through the tax credit. [3]

Highway and road infrastructure is maintained by federal and state governments. Freight rail infrastructure is maintained by private sector investments. Short lines use approximately 184 million gallons of fuel to move 10 million carloads of freight annually. Trucks would require 540 million gallons to move the same freight. Short lines keep 30 million truckloads per year off the highway. [4]

American Jobs Creation Act of 2004

The tax credit originated with the American Jobs Creation Act of 2004. The credit was capped at $3,500 per mile of track, with eligibility for Class II and Class III railroads, any shippers who transport property using a Class II or Class III railroad, and companies that perform maintenance on or provide material to qualified railroads. [5] With the passing of the act in October 2004, the effective date for the credit was December 31, 2004, with a scheduled expiration date of January 1, 2008, a period of three years.

Extensions

As scheduled, the tax credits originally expired on January 1, 2008. However, under the Emergency Economic Stabilization Act of 2008, the tax credit was extended through December 31, 2009. [6] Expiration occurred for the second time as scheduled, however, an extension of the Railroad Maintenance Tax Credit was included in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Under the new legislation, the credit was retroactively applied to the 2010 tax year and extended through January 1, 2012. [1]

United States fiscal cliff legislation retroactively reinstated the tax credit for 2012 when signed into law January 2, 2013. [7] After being delayed, the tax credit was again retroactively applied, this time to the 2018 tax year and extended through December 31, 2022. [2]

IRS Form 8900

Internal Revenue Service Form 8900 is used to claim the tax credit by the taxpayer at a maximum of $3500 per short line track mile per year or 50% of qualified railroad track maintenance paid or incurred during the year whichever is less. Form 8900 is used to assign tax credits between eligible taxpayers who have come to an agreement to transfer tax credits. Eligible taxpayers for this credit are short line railroads, transporters who use the railroad property and any taxpayer who furnishes goods and services to a short line railroad. Shareholders or partners of these eligible taxpayer may receive a passthru of these credits on form K-1. [8]

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References

  1. 1 2 Schaick, Jeff V. (December 17, 2010). "45G Short Line Tax Credit Extended through 2011". American Short Line and Regional Railroad Association. Archived from the original on 14 April 2013. Retrieved 26 December 2010.
  2. 1 2 "ASLRRA: Short-line tax credit to be part of spending bill". Progressive Railroading. December 17, 2019. Retrieved 18 December 2019.
  3. 1 2 Berman, Jeff (December 17, 2010). "Tax Cut Bill is Good News for Shortline Railroads". Logistics Management Modern Materials Handling and Supply Chain Management Review. Retrieved 26 December 2010.
  4. "Short line Tax Credit Extension". AmericanShort Line and Regional Track Association.
  5. "Railroad Track Maintenance Credit". Tax Almanac. November 19, 2010. Retrieved 26 December 2010.
  6. DiFilippo, Rosanna (October 2008). "Federal Tax Alert" (PDF). Moody, Famiglietti & Andronico. Retrieved 26 December 2010.
  7. "Fiscal Cliff legislation restores tax credit for short lines rail infrastructure". State Smart Transportation Initiative. 11 January 2013.
  8. "2013 Form 8900" (PDF).