Freight RAILCAR Act of 2021

I 117TH CONGRESS 1ST SESSION H. R. 2289 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the Internal Revenue Code of 1986 to provide a tax credit to encourage the replacement or modernization of inefficient, outdated freight railcars, and for other purposes.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 MARCH 29, 2021 Mr. SCHNEIDER (for himself, Mr. LAHOOD, Mr. BISHOP of Georgia, Mr. BLU- MENAUER, Ms. BONAMICI, Mr. CRAWFORD, Mr. RODNEY DAVIS of Illi- nois, Mr. GOHMERT, Mr. PAYNE, Ms. SEWELL, Mrs. WALORSKI, and Mr. WEBER of Texas) 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Internal Revenue Code of 1986 to provide a tax credit to encourage the replacement or moderniza- tion of inefficient, outdated freight railcars, and for other purposes.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 and Recovery Act of 2021’’ or the ‘‘Freight RAILCAR 6 Act of 2021’’. 7 VerDate Sep 11 2014 17:39 Jun 11, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2289.IH H2289 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 2289 IH SEC. 2. FREIGHT RAILCAR MODERNIZATION CREDIT. 1 (a) IN GENERAL.—Subpart D of part IV of sub- 2 chapter A of chapter 1 of the Internal Revenue Code of 3 1986 is amended by adding at the end the following new 4 section: 5 ‘‘SEC. 45U. FREIGHT RAILCAR MODERNIZATION CREDIT. 6 ‘‘(a) GENERAL RULE.—For purposes of section 38, 7 the freight railcar modernization credit determined under 8 this section for the taxable year is an amount equal to 9 50 percent of the taxpayer’s freight railcar fleet mod- 10 ernization expenses. 11 ‘‘(b) DEFINITIONS.—For purposes of this section— 12 ‘‘(1) FREIGHT RAILCAR FLEET MODERNIZATION 13 EXPENSES.—The term ‘freight railcar fleet mod- 14 ernization expenses’ means the sum of— 15 ‘‘(A) the qualifying railcar replacement 16 and modernization amount, 17 ‘‘(B) the qualifying scrap amount, and 18 ‘‘(C) the qualifying railcar facility and 19 technology modernization amount. 20 ‘‘(2) QUALIFYING RAILCAR REPLACEMENT AND 21 MODERNIZATION AMOUNT.—The term ‘qualifying 22 railcar replacement and modernization amount’ 23 means— 24 VerDate Sep 11 2014 17:39 Jun 11, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2289.IH H2289 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 2289 IH ‘‘(A) the basis of any qualified newly built 1 replacement railcar placed in service by the tax- 2 payer during the taxable year, plus 3 ‘‘(B) the qualified railcar modernization 4 expenditures of the taxpayer for the taxable 5 year. 6 ‘‘(3) QUALIFYING SCRAP AMOUNT.—The term 7 ‘qualifying scrap amount’ means— 8 ‘‘(A) the depreciated value or salvage 9 value, as applicable, of a qualified freight rail- 10 car (as such value is defined and calculated in 11 accordance with the Association of American 12 Railroads Interchange Rules) which is scrapped 13 by the taxpayer and permanently removed from 14 the AAR Umler System master file during the 15 taxable year, less 16 ‘‘(B) the sum of scrap and part out net 17 proceeds received by the taxpayer for such 18 qualified freight railcar. For purposes of this 19 subparagraph, scrap proceeds shall be cal- 20 culated by using the Association of American 21 Railroads Office Manual per pound credits for 22 steel, stainless steel, and aluminum (as applica- 23 ble) in effect on the date railcar is scrapped. 24 VerDate Sep 11 2014 17:39 Jun 11, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2289.IH H2289 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 2289 IH ‘‘(4) QUALIFYING RAILCAR FACILITY AND 1 TECHNOLOGY MODERNIZATION AMOUNT.—The term 2 ‘qualifying railcar facility equipment and technology 3 modernization amount’ means amounts paid or in- 4 curred by the taxpayer for any railcar facility and 5 technology modernization property placed in service 6 during the taxable year. 7 ‘‘(A) RAILCAR FACILITY AND TECHNOLOGY 8 MODERNIZATION PROPERTY.—The term ‘railcar 9 facility and technology modernization property’ 10 means property— 11 ‘‘(i) chargeable to capital account, 12 ‘‘(ii) placed in service by a qualified 13 railway supply company, 14 ‘‘(iii) the original use of which com- 15 mences with the taxpayer, 16 ‘‘(iv) which is used to modernize an 17 existing qualified facility or existing rail- 18 cars, and 19 ‘‘(v) is used for modernization pur- 20 poses. 21 ‘‘(B) MODERNIZATION OF EXISTING 22 QUALIFIED FACILITIES OR EXISTING RAIL- 23 CARS.—Property is used to modernize an exist- 24 VerDate Sep 11 2014 17:39 Jun 11, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2289.IH H2289 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 2289 IH ing qualified facility or an existing railcar if 1 such property— 2 ‘‘(i) enables such facility to implement 3 enhanced controls to meet environmental 4 standards, including emissions limits under 5 the Clean Air Act or wastewater standards 6 under the Clean Water Act and cor- 7 responding State/local requirements, or 8 ‘‘(ii) is associated with the deployment 9 of technological equipment used by any 10 owner of a freight railcar, or of an existing 11 qualified facility, to manufacture, repair, 12 or modernize railcars, or manufacture rail- 13 car components that improve the effi- 14 ciency, quality, or safety of— 15 ‘‘(I) fleet management oper- 16 ations, or 17 ‘‘(II) railcar or railcar component 18 manufacturing, repair, or moderniza- 19 tion operations conducted pursuant to 20 activity code certifications under the 21 Association of American Railroads 22 Manual of Standards and Rec- 23 ommended Practice, Section C, Part 24 III, Appendix B (Specification 25 VerDate Sep 11 2014 17:39 Jun 11, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2289.IH H2289 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 2289 IH M1002) or Association of American 1 Railroads Manual of Standards and 2 Recommended Practice, Section J, 3 Quality Assurance (Specification M– 4 1003). 5 ‘‘(C) MODERNIZATION PURPOSES.—For 6 purposes of this paragraph, the following types 7 of property shall be considered as used for mod- 8 ernization purposes— 9 ‘‘(i) testing and reliability equipment 10 that facilitates the development of safer 11 railcars and railcar components by AAR 12 certified manufacturers, including acceler- 13 ated life-cycle testing equipment, 14 ‘‘(ii) innovative technological equip- 15 ment that generates data relating to the 16 operating conditions of rolling stock and 17 communicates such data in an efficient 18 manner, with the goal of improving railcar 19 fleet safety, including smart technology on 20 cars to monitor conditions such as leaks, 21 equipment damage, or high acceleration 22 events, 23 ‘‘(iii) remote controlled technological 24 equipment that allows for inspections, 25 VerDate Sep 11 2014 17:39 Jun 11, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2289.IH H2289 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 2289 IH cleaning or repairs to railcars to be con- 1 ducted remotely, 2 ‘‘(iv) equipment which increases the 3 efficiency or capacity of, and enhances en- 4 vironmental controls related to facilities 5 which conduct AAR certified blasting, 6 cleaning, coating, and painting railcar ac- 7 tivities, 8 ‘‘(v) regenerative thermal oxidizers of 9 volatile organic compounds or hazardous 10 air pollutants, and 11 ‘‘(vi) innovative technological equip- 12 ment or software that will enhance the effi- 13 ciency of a railcar owner’s fleet manage- 14 ment systems, including programs that 15 map timing and routing of railcars to re- 16 pair shops or storage facilities that im- 17 prove efficiency of rail transportation. 18 ‘‘(5) QUALIFIED NEWLY BUILT REPLACEMENT 19 RAILCAR.—The term ‘qualified newly built replace- 20 ment railcar’ means a qualified freight railcar 21 which— 22 ‘‘(A) is built after the date of the enact- 23 ment of this section, 24 VerDate Sep 11 2014 17:39 Jun 11, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2289.IH H2289 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 2289 IH ‘‘(B) is ordered or originally placed in serv- 1 ice before January 1, 2025, and 2 ‘‘(C) replaces two freight railcars owned by 3 the taxpayer that— 4 ‘‘(i) were in service within the 48 5 months preceding the beginning of the tax- 6 able year, and 7 ‘‘(ii) which were both scrapped and 8 permanently removed from the AAR Umler 9 System master file during such taxable 10 year. 11 ‘‘(6) ORIGINATES.—The term ‘originates’ refers 12 to the country of origin of a part, component, sub- 13 assembly or finished product, as described in the 14 Rules of Origin of Article 4.2 of the United States– 15 Mexico–Canada Agreement (19 U.S.C. 4531(c)) or 16 any subsequent free trade agreement between the 17 United States, Mexico, and Canada. 18 ‘‘(7) QUALIFIED RAILWAY SUPPLY COMPANY.— 19 The term ‘qualified railway supply company’ means 20 an entity that manufactures, repairs, modernizes or 21 owns freight railcars or manufactures components 22 for freight railcars, that is not an entity that would 23 be ineligible for an award of a contract or sub- 24 contract under 49 U.S.C. 5323(u). 25 VerDate Sep 11 2014 17:39 Jun 11, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2289.IH H2289 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 2289 IH ‘‘(8) QUALIFIED FREIGHT RAILCAR.— 1 ‘‘(A) IN GENERAL.—The term ‘qualified 2 freight railcar’ means a freight railcar that— 3 ‘‘(i) is either acquired or modernized 4 by the taxpayer after the date of the enact- 5 ment of this section, 6 ‘‘(ii) meets the significant improve- 7 ment requirements for capacity, fuel effi- 8 ciency, or performance of subparagraph 9 (B), 10 ‘‘(iii) originates from a qualified rail- 11 way supply company and was built in a 12 qualified facility, and 13 ‘‘(iv) with respect to which no credit 14 under this section was previously claimed 15 by any taxpayer. 16 ‘‘(B) SIGNIFICANT IMPROVEMENT.—For 17 purposes of this paragraph, an improvement in 18 capacity or fuel efficiency and performance with 19 respect to a modernized freight railcar is a sig- 20 nificant improvement if— 21 ‘‘(i) such capacity or fuel efficiency, as 22 the case may be, is increased by at least 8 23 percent, or 24 VerDate Sep 11 2014 17:39 Jun 11, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H2289.IH H2289 pamtmann on DSKBC07HB2PROD with BILLS 10 •HR 2289 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 ‘‘(9) 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 ‘‘(10) QUALIFIED FACILITY.—The term ‘quali- 22 fied facility’ means a facility that is located within 23 the United States and owned by any entity other 24 than an entity that would be ineligible for an award 25 VerDate Sep 11 2014 17:39 Jun 11, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2289.IH H2289 pamtmann on DSKBC07HB2PROD with BILLS 11 •HR 2289 IH of a contract or subcontract under 49 U.S.C. 1 5323(u). 2 ‘‘(c) 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) CREDIT TREATED AS REFUNDABLE.—In 8 the case of any taxable year in which the taxpayer 9 is allowed a credit under subsection (a) and is un- 10 able to use such credit as an offset to the regular 11 tax liability of such taxpayer, such taxpayer may 12 elect to have such credit treated as an overpayment 13 and refunded to the taxpayer for such year. 14 ‘‘(3) BASIS ADJUSTMENT.—For purposes of 15 this subtitle, if a credit is allowed under subsection 16 (a) with respect to any qualified freight railcar, the 17 basis of such railcar shall be reduced by the amount 18 of the credit so allowed. 19 ‘‘(4) SALE-LEASEBACK.—For purposes of sub- 20 section (a), if any qualified freight railcar is— 21 ‘‘(A) originally placed in service by a per- 22 son after the date of the enactment of this sec- 23 tion, and 24 VerDate Sep 11 2014 17:39 Jun 11, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H2289.IH H2289 pamtmann on DSKBC07HB2PROD with BILLS 12 •HR 2289 IH ‘‘(B) sold and leased back by such person 1 within 3 months after such railcar is originally 2 placed in service (or, in the case of more than 3 one railcar subject to the same lease, within 3 4 months after the date the final railcar is placed 5 in service, so long as the period between the 6 time the first railcar is placed in service and the 7 time the last railcar is placed in service does 8 not exceed 24 months), such railcar shall be 9 treated as originally placed in service not earlier 10 than the date on which such railcar is used 11 under the leaseback referred to in this para- 12 graph. 13 ‘‘(5) SYNDICATION.—For purposes of sub- 14 section (a), if— 15 ‘‘(A) any qualified freight railcar is origi- 16 nally placed in service after the date of enact- 17 ment of this section by the lessor of such rail- 18 car, 19 ‘‘(B) such railcar is sold by such lessor or 20 any subsequent purchaser within 3 months 21 after the date such railcar was originally placed 22 in service (or, in the case of more than one rail- 23 car subject to the same lease, within 3 months 24 after the date the final railcar is placed in serv- 25 VerDate Sep 11 2014 17:39 Jun 11, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H2289.IH H2289 pamtmann on DSKBC07HB2PROD with BILLS 13 •HR 2289 IH ice and the time the last railcar is placed in 1 service does not exceed 12 months), and 2 ‘‘(C) the user of such railcar after the last 3 sale during such 3-month period remains the 4 same as when such railcar was originally placed 5 in service, such railcars shall be treated as 6 originally placed in service not earlier than the 7 date of such last sale. 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