December 22, 2020 – TRA Newswire - The 45 short line railroads operating in Texas got their Christmas gift several days early when the omnibus appropriations/coronavirus relief/tax legislation passed in Congress. That bill contained the law that makes permanent the Short Line Tax Credit (45G), providing a tax credit to support private investment in improving and building infrastructure up to a $3,500 cap per short line railroad mile.



“We applaud Congress for their bi-partisan bi-cameral action to make the effective and popular Short Line Tax Credit permanent,” said Chuck Baker, President, American Short Line and Regional Railroads (ASLRRA). “With the passage of this bill, our mission to connect rural and small town America to larger domestic and global markets in a safe, efficient, and environmentally friendly way is set to receive a significant boost. Creating long-term tax certainty will enable small business railroads to meet customer needs throughout the country, particularly in the energy, agriculture and manufacturing industries, immediately and far into the future.”



"Permanent passage of the Short Line Tax Credit will ultimately benefit many miles of branch line rail operators in Texas that want to improve their track and infrastructure to attract more rail-served business and industry to our growing state," according to Texas Rail Advocates President Peter LeCody. "Texas Short Line railroads represent more than 20 percent of the state rail network and play an important first-mile, last-mile connection to Class 1 railroads Union Pacific, BNSF Railway and Kansas City Southern. Texas short line railroads haul close to 380 million tons of freight each year and drive over $350 million in economic output in the state."



First introduced into law in 2005, 45G has been one of the most successful public-private partnerships on record, supporting hundreds of small railroads as they have invested more than $5B to date to improve safety and upgrade lines that had experienced decades of deferred maintenance and were frequently on the verge of abandonment before becoming short lines.



However, the temporary and uncertain nature of the credit has been subject to the vagaries of the tax extenders process and has thus frequently been authorized retroactively and for one or two years at a time. In this legislation, the credit would remain at the current $3,500/per mile limit indefinitely (i.e., no expiration date will be built into the law), with the rate of the credit at the current 50% rate for 2020, 2021, and 2022 and then adjusting to 40% beginning in 2023.



“With permanency of the 45G tax credit, the bill provides much needed support to short line railroads, many of whom are family-owned and operated, who have struggled to keep people employed in small localities across the nation during the COVID-19 pandemic while rising to the occasion to deliver reliable transportation as part of the nation’s critical workforce,” said Baker.