Senate bill would give rails tax credits for expanding capacity
A bill introduced in the Senate on Aug. 6 would provide the nation's freight railroads with federal tax incentives to spur investment in new equipment and infrastructure that would encourage more freight to move by rail.
The bill, introduced by Sens. Kent Conrad (D-N.D.) and John Ensign (R-Nev.), would give railroads a 25 percent tax credit for qualifying investments such as trackage, locomotives, tunnels, rail yards, and intermodal transfer and transloading facilities.
The bill would also allow railroads to expense all qualifying capital purchases instead of depreciating them, a change that would accelerate the pace of capital investment needed to expand rail capacity.
The Senate bill mirrors legislation in the House introduced in 2009 by Rep. Kendrick Meek (D-Fla.). The railroad industry has lobbied hard for two years to advance these initiatives but with little success so far.
The Association of American Railroads hailed the measure, saying incentives are needed both to strengthen the nation's goods-moving system and to improve the underlying network for proposed high-speed passenger rail service that would move over the nation's freight tracks.
Railroads, which finance infrastructure projects with private funds, said they spent $460 billion from 1980 to 2009 on network expansion. Without some form of government stimulus, the industry projects that it will face a $39 billion shortfall in infrastructure needs by 2035 to meet projected demand.
The American Trucking Associations said it had no comment on the legislation.
Lawrence H Kaufman, a noted rail writer, executive, and consultant, said an investment tax credit, if properly crafted, could generate enough economic benefits to more than offset the impact on the U.S. Treasury in lost tax revenue. Kaufman said railroads need sufficient access to capital in order to "build their way out of congestion." A properly designed investment tax credit, he said, "gives them greater access to capital."
