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Rail News Home Short Lines & Regionals

February 2008

Rail News: Short Lines & Regionals

Short-line tax credits on temporary hold

Don’t worry short liners. Although your federal tax credits have expired, they likely won’t stay that way for long.

Congress didn’t extend the tax credits before recessing for the holidays, so legislation governing the credits officially expired Dec. 31. However, the infrastructure funding mechanism is expected to receive a new lease on life during the next few months.

Lobbying efforts to extend the tax credits have resumed now that Congress is in full force again and back to a regular schedule following President Bush’s State of the Union address on Jan. 28. The credits figure to be a hot topic March 13 at Railroad Day on Capitol Hill in Washington, D.C.

A package deal

Prior to the holidays, Congress didn’t consider an “extenders package,” which would have included short-line tax credits, or Section 45G of U.S. tax code, says Adam Nordstrom, a partner with short-line industry lobbying firm Chambers, Conlon & Hartwell L.L.C.

The package would have extended a number of expiring tax-related laws beyond Dec. 31. For short-line tax credits, the House proposed a one-year extension and the Senate, a two-year extension.

Because it’s an election year, the odds are favorable that the short-line industry will obtain a multi-year extension sometime in early to mid-2008, says Nordstrom.

“I would envision them doing a two-year extension,” he says, adding that many congressmen don’t want to be approached every year for an extension. “Congress wants to get its work done early before the election.”

Enacted in 2005, Section 45G enabled short lines to claim a tax credit of 50 cents for every dollar spent on infrastructure improvements, up to a cap of $3,500 per mile of owned or leased track.

Through the Short Line Railroad Investment Act of 2007 (H.R. 1584/S. 881), lobbyists last year sought to extend the credits three years, increase the mileage-based credit limitation to $4,500, minimize the Alternative Minimum Tax’s impact on credits, and provide eligibility for short lines formed in 2005 and 2006.

Some or all of those provisions might be included in new tax credit legislation.

— Jeff Stagl


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