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Railroad Maintenance: One Tax Credit That Is All but Permanent

Karen Bleier/AFP/Getty Images
The railroad maintenance tax credit — which can offset up to 50 percent of the amount a freight carrier spends on maintaining its infrastructure — exemplifies temporary provisions in the tax code that have become entrenched features of the business tax landscape.

After small, independent railroad companies proliferated in the 1980s, major consolidation began in earnest in the 1990s. A 2002 Transportation Quarterly article stated, “By far the leading fuel of growth [of the short-line railroad industry] has been the entry of holding companies that own multiple railroads.”

But short lines also face major challenges. Around 2000, ASLRRA started pointing to moves by the major railroad companies to introduce heavier freight cars that required short-line companies to invest in sturdier tracks to accommodate the loads.

ASLRRA began lobbying for legislation to help with the equipment upgrade.

In 2004, the trade group won a four-year railroad tax credit, estimated to cost the government $501 million, that was among several corporate tax cuts included in legislation (PL 108-27) that replaced a tax break for exporters that had been ruled illegal by the World Trade Organization.

Symbiotic Relationships

ASLRRA originally said it was only asking for a temporary tax credit to cover part of the $7 billion it estimated was necessary to invest in new rails. But that message has changed over time.

In its latest lobbying push to extend the credit, the group has emphasized the recent success of short-line railroads in specific congressional districts across the country.

It has promoted legislation that would continue the tax credit through 2017 “to provide important long-term planning certainty necessary to maximize private sector transportation infrastructure investment.”

Like other temporary tax provisions, the railroad maintenance credit has created new, symbiotic relationships. Since 2004, ASLRRA’s spending on lobbying and Genesee’s support of a political action committee that has spent on political campaigns have both roughly doubled, according to the Center for Responsive Politics.

In the 2012 election cycle, Genesee gave money to a variety of congressional tax writers, including Jenkins. It was the second-largest contributor to Rep. Earl Blumenauer of Oregon, the lead Democratic co-sponsor of the bill (HR 721) to extend the 45G credit, who has said he supports freight rail for environmental and economic reasons.

Genesee & Wyoming also operates a rail line in Oregon that runs through Blumenauer’s Portland district.

The Tax Policy Center’s Marron says the economy as a whole would be better off if Congress turned the current view of extenders on its head. Instead of assuming that most temporary tax breaks will be continued, lawmakers should “move to a system in which the presumption, rebuttable to be sure, is that expiring provisions will expire unless supporters can justify their continuation,” Marron said. “In short, they should be the expirers.”

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