What This Bill Does
This bill creates a new tax credit to help companies buy new freight railcars (railway cargo cars) or upgrade old ones. The credit equals 10 percent of what a company spends on replacing or modernizing inefficient freight railcars. (Sec. 2)
Who It Affects
Businesses that own freight railcars and want to replace or upgrade them. The Secretary of the Treasury (the federal official in charge of tax matters) must track how often the credit is used.
Key Provisions
• Companies can claim a tax credit equal to 10 percent of their freight railcar fleet modernization expenses, but no more than 2,000 railcars per company per year can be counted for this credit. (Sec. 2(b))
• To qualify for the credit, a new railcar must replace two old railcars owned by the company that were scrapped and permanently removed from service in the same tax year. (Sec. 2(c)(3))
• A modernized (upgraded) railcar only qualifies if it increases capacity or fuel efficiency by at least 8 percent, or meets specific safety standards set by the Association of American Railroads and Pipeline and Hazardous Materials Safety Administration. (Sec. 2(c)(4)(B))
• Companies cannot claim this credit for the same expense twice (for example, they cannot also claim a deduction for the same cost). (Sec. 2(d)(1))
• Railcars must be built in a qualified facility, meaning a facility not owned or leased by entities that are ineligible for federal contracts. (Sec. 2(c)(6))
What Changes
Companies that replace or modernize freight railcars after December 31, 2022 and before three years after this bill becomes law can claim a 10 percent tax credit on those expenses. This credit reduces the total taxes a company owes to the federal government.
Important Definitions
• Modernized: Modified, retrofitted, converted or rebuilt to meet improvement standards. (Sec. 2(c)(9))
• Qualified freight railcar: A railcar acquired or modernized after this bill passes that meets fuel efficiency or capacity improvements and was built in a qualified facility. (Sec. 2(c)(4))
Effective Date
The credit applies to railcars placed in service and expenses paid after December 31, 2022. The credit stops applying to any purchases three years after this bill becomes law.
I
118TH CONGRESS
1ST SESSION
H. R. 838
To amend the Internal Revenue Code of 1986 to provide a tax credit to
encourage the replacement or modernization of inefficient, outdated
freight railcars, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 6, 2023
Mr. LAHOOD (for himself, Mr. SCHNEIDER, Mr. BACON, Mr. BISHOP of Geor-
gia, Mr. BANKS, Mr. BLUMENAUER, Mr. CARL, Ms. BONAMICI, Mr.
CRAWFORD, Mr. CUELLAR, Mr. ELLZEY, Mr. KILDEE, Mr. FERGUSON,
Mr. PANETTA, Ms. GRANGER, Ms. SA´NCHEZ, Mr. GRAVES of Missouri,
Ms. SEWELL, Mr. TONY GONZALES of Texas, Ms. TITUS, Mr. HUDSON,
Ms. DAVIDS of Kansas, Mr. HERN, Mr. HUNT, Mr. MCCAUL, Mr.
MORAN, Mr. MURPHY, Mr. ROGERS of Alabama, Mr. WILLIAMS of Texas,
and Ms. VAN DUYNE) introduced the following bill; which was referred
to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
a tax credit to encourage the replacement or moderniza-
tion of inefficient, outdated freight railcars, and for other
purposes.
Be it enacted by the Senate and House of Representa-
1
tives of the United States of America in Congress assembled,
2
SECTION 1. SHORT TITLE.
3
This Act may be cited as the ‘‘Freight Rail Assist-
4
ance and Investment to Launch Coronavirus-era Activity
5
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and Recovery Act of 2023’’ or the ‘‘Freight RAILCAR
1
Act of 2023’’.
2
SEC. 2. FREIGHT RAILCAR MODERNIZATION CREDIT.
3
(a) IN GENERAL.—Subpart D of part IV of sub-
4
chapter A of chapter 1 of the Internal Revenue Code of
5
1986 is amended by adding at the end the following new
6
section:
7
‘‘SEC. 45BB. FREIGHT RAILCAR MODERNIZATION CREDIT.
8
‘‘(a) IN GENERAL.—For purposes of section 38, the
9
freight railcar modernization credit determined under this
10
section for the taxable year is an amount equal to 10 per-
11
cent of the taxpayer’s freight railcar fleet modernization
12
expenses.
13
‘‘(b) LIMITATION.—No more than 2,000 qualified
14
freight railcars per taxpayer may be taken into account
15
for purposes of determining the credit under subsection
16
(a) with respect to a taxable year.
17
‘‘(c) DEFINITIONS.—For purposes of this section—
18
‘‘(1) FREIGHT RAILCAR FLEET MODERNIZATION
19
EXPENSES.—The term ‘freight railcar fleet mod-
20
ernization expenses’ means the sum of the qualifying
21
railcar replacement and modernization amount.
22
‘‘(2) QUALIFYING RAILCAR REPLACEMENT AND
23
MODERNIZATION
AMOUNT.—The term ‘qualifying
24
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railcar replacement and modernization amount’
1
means—
2
‘‘(A) the basis of any qualified newly built
3
replacement railcar placed in service by the tax-
4
payer during the taxable year, plus
5
‘‘(B) the qualified railcar modernization
6
expenditures of the taxpayer for the taxable
7
year.
8
‘‘(3) QUALIFIED NEWLY BUILT REPLACEMENT
9
RAILCAR.—The term ‘qualified newly built replace-
10
ment railcar’ means a qualified freight railcar
11
which—
12
‘‘(A) is built after the date of the enact-
13
ment of this section,
14
‘‘(B) is ordered or originally placed in serv-
15
ice before the date that is three years after the
16
date of the enactment of this section, and
17
‘‘(C) replaces two freight railcars owned by
18
the taxpayer that—
19
‘‘(i) were in service within the 48
20
months preceding the beginning of the tax-
21
able year, and
22
‘‘(ii) which were both scrapped and
23
permanently removed from the AAR Umler
24
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•HR 838 IH
System master file during such taxable
1
year.
2
‘‘(4) QUALIFIED FREIGHT RAILCAR.—
3
‘‘(A) IN
GENERAL.—The term ‘qualified
4
freight railcar’ means a freight railcar that—
5
‘‘(i) is either acquired or modernized
6
by the taxpayer after the date of the enact-
7
ment of this section,
8
‘‘(ii) meets the significant improve-
9
ment requirements for capacity, fuel effi-
10
ciency, or performance of subparagraph
11
(B),
12
‘‘(iii) was built in a qualified facility,
13
and
14
‘‘(iv) with respect to which no credit
15
under this section was previously claimed
16
by any taxpayer.
17
‘‘(B) SIGNIFICANT
IMPROVEMENT.—For
18
purposes of this paragraph, an improvement in
19
capacity or fuel efficiency and performance with
20
respect to a modernized freight railcar is a sig-
21
nificant improvement if—
22
‘‘(i) such capacity or fuel efficiency, as
23
the case may be, is increased by at least 8
24
percent, or
25
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•HR 838 IH
‘‘(ii) in the case of performance, the
1
qualified freight railcar meets the require-
2
ments of the Association of American Rail-
3
roads Standard S–286 or is modernized to
4
meet the design standards set forth in final
5
rule HM–251 of the Pipeline and Haz-
6
ardous Materials Safety Administration (as
7
amended by HM–251C).
8
‘‘(C) MODERNIZED.—The term ‘modern-
9
ized’ means modified, retrofitted, converted or
10
rebuilt for the purpose of meeting the signifi-
11
cant improvement criteria of subparagraph (B).
12
‘‘(5) QUALIFIED RAILCAR MODERNIZATION EX-
13
PENDITURE.—The term ‘qualified railcar moderniza-
14
tion expenditure’ means any amount paid or in-
15
curred—
16
‘‘(A) in connection with the modernization
17
of a freight railcar resulting in such railcar
18
being designated a qualified freight railcar, and
19
‘‘(B) which is properly chargeable to a cap-
20
ital account with respect to such freight railcar.
21
‘‘(6) QUALIFIED FACILITY.—The term ‘quali-
22
fied facility’ means a facility that is not owned or
23
leased by an entity that would be ineligible for an
24
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•HR 838 IH
award of a contract or subcontract under 49 U.S.C.
1
5323(u).
2
‘‘(d) SPECIAL RULES.—
3
‘‘(1) DENIAL OF DOUBLE BENEFIT.—No credit
4
shall be allowed under subsection (a) for any ex-
5
pense for which a deduction or credit is allowed
6
under any other provision of this chapter.
7
‘‘(2) BASIS
ADJUSTMENT.—For purposes of
8
this subtitle, if a credit is allowed under subsection
9
(a) with respect to any qualified freight railcar, the
10
basis of such railcar shall be reduced by the amount
11
of the credit so allowed.
12
‘‘(3) SALE-LEASEBACK.—For purposes of sub-
13
section (a), if any qualified freight railcar is—
14
‘‘(A) originally placed in service by a per-
15
son after the date of the enactment of this sec-
16
tion, and
17
‘‘(B) sold and leased back by such person
18
within 3 months after such railcar is originally
19
placed in service (or, in the case of more than
20
one railcar subject to the same lease, within 3
21
months after the date the final railcar is placed
22
in service, so long as the period between the
23
time the first railcar is placed in service and the
24
time the last railcar is placed in service does
25
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•HR 838 IH
not exceed 24 months), such railcar shall be
1
treated as originally placed in service not earlier
2
than the date on which such railcar is used
3
under the leaseback referred to in this para-
4
graph.
5
‘‘(4) SYNDICATION.—For purposes of sub-
6
section (a), if—
7
‘‘(A) any qualified freight railcar is origi-
8
nally placed in service after the date of enact-
9
ment of this section by the lessor of such rail-
10
car,
11
‘‘(B) such railcar is sold by such lessor or
12
any subsequent purchaser within 3 months
13
after the date such railcar was originally placed
14
in service (or, in the case of more than one rail-
15
car subject to the same lease, within 3 months
16
after the date the final railcar is placed in serv-
17
ice and the time the last railcar is placed in
18
service does not exceed 12 months), and
19
‘‘(C) the user of such railcar after the last
20
sale during such 3-month period remains the
21
same as when such railcar was originally placed
22
in service, such railcars shall be treated as
23
originally placed in service not earlier than the
24
date of such last sale.
25
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‘‘(5) ENTITIES
OWNED
OR
CONTROLLED
BY
1
STATE-OWNED ENTERPRISES INELIGIBLE.—No cred-
2
it under subsection (a) shall be allowed to any tax-
3
payer that would be ineligible for an award of a con-
4
tract or subcontract under 49 U.S.C. 5323(u).
5
‘‘(e) TERMINATION.—This section shall not apply to
6
any qualifying railcar replacement and modernization
7
amount after the date that is three years after the date
8
of the enactment of this section.’’.
9
(b) CREDIT ALLOWED AS BUSINESS CREDIT.—Sec-
10
tion 38(b) of the Internal Revenue Code of 1986 (relating
11
to current year business credit) is amended by striking
12
‘‘plus’’ at the end of paragraph (40), by striking the period
13
at the end of paragraph (41) and inserting ‘‘, plus’’ and
14
by inserting at the end thereof the following new para-
15
graph:
16
‘‘(42) the freight railcar modernization credit
17
determined under section 45BB.’’.
18
(c) COORDINATION
WITH
SECTION
55.—Section
19
38(c)(4)(B) of the Internal Revenue Code of 1986 is
20
amended by redesignating clauses (x), (xi), and (xii) as
21
clauses (xi), (xii), and (xiii), respectively, and by inserting
22
after clause (ix) the following new clause:
23
‘‘(x) the freight railcar modernization
24
credit determined under section 45BB,’’.
25
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•HR 838 IH
(d) CLERICAL AMENDMENT.—The table of sections
1
for subpart D of part IV of subchapter A of chapter 1
2
of the Internal Revenue Code of 1986 is amended by in-
3
serting after the item relating to section 45AA the fol-
4
lowing new item:
5
‘‘Sec. 45BB. Freight railcar modernization credit.’’.
(e) EFFECTIVE DATE.—The amendments made by
6
this section shall apply to property placed in service, and
7
amounts paid or incurred, after December 31, 2022.
8
SEC. 3. REPORT ON THE FREIGHT RAILCAR MODERNIZA-
9
TION CREDIT.
10
(a) IN GENERAL.—Not later than 3 years after the
11
date of the enactment of this Act, the Secretary of the
12
Treasury (or the Secretary’s delegate), shall submit to the
13
Committee on Ways and Means of the House of Rep-
14
resentatives and the Committee on Finance of the Senate
15
a report on activity with respect to the qualified freight
16
railcar credit under section 45BB of the Internal Revenue
17
Code of 1986.
18
(b) REPORT
CONTENTS.—The report submitted
19
under subsection (a) shall contain information with re-
20
spect to the following:
21
(1) The number of times the credit was
22
claimed.
23
(2) The number of railcars scrapped as a result
24
of the credit.
25
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•HR 838 IH
(3) The number of new railcars entered into
1
contract as a result of the credit.
2
(4) The number of new railcars built as a result
3
of the credit.
4
Æ
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