Freight RAILCAR Act of 2020

I 116TH CONGRESS 2D SESSION H. R. 8082 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the Internal Revenue Code of 1986 to provide a tax credit to encourage the replacement or modernization of inefficient, outdated freight railcars, and for other purposes.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 AUGUST 21, 2020 Mr. SCHNEIDER (for himself, Mr. LAHOOD, Mr. LIPINSKI, Mr. CRAWFORD, Mr. BLUMENAUER, and Mr. FERGUSON) 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Internal Revenue Code of 1986 to provide a tax credit to encourage the replacement or moderniza- tion of inefficient, outdated freight railcars, and for other purposes.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 2020’’ or the ‘‘Freight RAILCAR 6 Act of 2020’’. 7 VerDate Sep 11 2014 23:29 Sep 17, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H8082.IH H8082 tkelley on DSKBCP9HB2PROD with BILLS 2 •HR 8082 IH SEC. 2. QUALIFIED FREIGHT RAILCAR 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. QUALIFIED FREIGHT RAILCAR CREDIT. 6 ‘‘(a) GENERAL RULE.—For purposes of section 38, 7 the qualified freight railcar credit determined under this 8 section for the taxable year is an amount equal to 50 per- 9 cent of the sum of— 10 ‘‘(1) the qualifying replacement or moderniza- 11 tion amount, 12 ‘‘(2) the qualifying scrap amount, and 13 ‘‘(3) the qualifying railcar facility and tech- 14 nology modernization amount. 15 ‘‘(b) DEFINITIONS.—In this section— 16 ‘‘(1) QUALIFYING REPLACEMENT OR MOD- 17 ERNIZATION AMOUNT.—The term ‘qualifying re- 18 placement or modernization amount’ means— 19 ‘‘(A) the basis of any newly built qualified 20 freight railcar placed in service by the taxpayer 21 during the taxable year, plus 22 ‘‘(B) the qualified freight railcar mod- 23 ernization expenditures of the taxpayer for the 24 taxable year. 25 VerDate Sep 11 2014 23:29 Sep 17, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H8082.IH H8082 tkelley on DSKBCP9HB2PROD with BILLS 3 •HR 8082 IH ‘‘(2) QUALIFYING SCRAP AMOUNT.—The term 1 ‘qualifying scrap amount’ means— 2 ‘‘(A) the depreciated value of a qualified 3 freight railcar, as such value is defined and cal- 4 culated in accordance with the Association of 5 American Railroads Interchange Rules, less 6 ‘‘(B) the sum of scrap and part out net 7 proceeds received by the taxpayer for such 8 qualified freight railcar. 9 ‘‘(3) QUALIFYING RAILCAR FACILITY AND 10 TECHNOLOGY MODERNIZATION AMOUNT.—The term 11 ‘qualifying railcar facility equipment and technology 12 modernization amount’ means total expenditures 13 chargeable to capital account by a qualified railway 14 supply company— 15 ‘‘(A) for re-equipping and enhancing the 16 infrastructure of an existing qualified facility 17 for the manufacture, repair, or modernization 18 of railcars, which— 19 ‘‘(i) enables such facility, after such 20 improvements, to modernize railcars such 21 that they will meet the requirements of the 22 Association of American Railroads Stand- 23 ard S–286 or the design standards set 24 forth in the Pipeline and Hazardous Mate- 25 VerDate Sep 11 2014 23:29 Sep 17, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H8082.IH H8082 tkelley on DSKBCP9HB2PROD with BILLS 4 •HR 8082 IH rials Safety Administration’s HM–251 1 final rule (as amended by HM–251C), or 2 ‘‘(ii) enables such facility to imple- 3 ment enhanced controls to meet environ- 4 mental standards including emissions lim- 5 its under the Clean Air Act or wastewater 6 standards under the Clean Water Act and 7 corresponding state/local requirements, or 8 ‘‘(B) is associated with the deployment of 9 technology, including equipment, used by any 10 owner of a qualified freight railcar or an exist- 11 ing qualified facility to manufacture, repair, or 12 modernize railcars or to manufacture railcar 13 components that improves the efficiency, qual- 14 ity, or safety of railcar or railcar component 15 manufacturing, repair, modernization or fleet 16 management operations. 17 ‘‘(4) NEWLY BUILT REPLACEMENT RAILCAR.— 18 The term ‘newly built replacement railcar’ means a 19 qualified freight railcar which— 20 ‘‘(A) is built after the date of the enact- 21 ment of this section, and 22 ‘‘(B) is ordered or originally placed in serv- 23 ice before January 1, 2025. 24 VerDate Sep 11 2014 23:29 Sep 17, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H8082.IH H8082 tkelley on DSKBCP9HB2PROD with BILLS 5 •HR 8082 IH ‘‘(5) ORIGINATES.—The term ‘originates’ refers 1 to the country of origin of a part, component, sub- 2 assembly or finished product, as described in the 3 Rules of Origin of Article 4.2 of the United States– 4 Mexico–Canada Agreement (19 U.S.C. 4531(c)) or 5 any subsequent free trade agreement between the 6 United States, Mexico, and Canada. 7 ‘‘(6) QUALIFIED RAILWAY SUPPLY COMPANY.— 8 The term ‘qualified railway supply company’ means 9 an entity that manufactures, repairs, modernizes or 10 owns a qualified freight railcar or manufactures 11 components for qualified freight railcars, that is not 12 an entity that would be ineligible for an award of a 13 contract or subcontract under 49 U.S.C. 5323(u). 14 ‘‘(7) QUALIFIED FREIGHT RAILCAR.— 15 ‘‘(A) IN GENERAL.—The term ‘qualified 16 freight railcar’ means a freight railcar that— 17 ‘‘(i) is either acquired or modernized 18 by the taxpayer after the date of the enact- 19 ment of this section, 20 ‘‘(ii) meets the significant improve- 21 ment requirements for capacity, fuel effi- 22 ciency, or performance of subparagraph 23 (B), 24 VerDate Sep 11 2014 23:29 Sep 17, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H8082.IH H8082 tkelley on DSKBCP9HB2PROD with BILLS 6 •HR 8082 IH ‘‘(iii) originates from a qualified rail- 1 way supply company and was built in a 2 qualified facility, and 3 ‘‘(iv) with respect to which no credit 4 under this section has been previously 5 claimed by any taxpayer. 6 ‘‘(B) SIGNIFICANT IMPROVEMENT RE- 7 QUIREMENTS.— 8 ‘‘(i) IN GENERAL.—A freight railcar 9 shall be treated as meeting significant im- 10 provement requirements for capacity, fuel 11 efficiency, or performance if— 12 ‘‘(I) in the case of a newly built 13 replacement railcar, the taxpayer cer- 14 tifies— 15 ‘‘(aa) such railcar is owned 16 by the taxpayer, and 17 ‘‘(bb) that— 18 ‘‘(AA) such railcar re- 19 places two freight railcars 20 owned by the taxpayer that 21 were in service within the 48 22 months preceding the tax- 23 able year, and 24 VerDate Sep 11 2014 23:29 Sep 17, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H8082.IH H8082 tkelley on DSKBCP9HB2PROD with BILLS 7 •HR 8082 IH ‘‘(BB) such freight rail- 1 cars were scrapped and per- 2 manently removed from the 3 AAR Umler System master 4 file during the taxable year, 5 and 6 ‘‘(II) in the case of a freight rail- 7 car that is modernized, the taxpayer 8 certifies that the modernization has 9 resulted in a significant improvement 10 in capacity, fuel efficiency or perform- 11 ance. 12 ‘‘(ii) SIGNIFICANT IMPROVEMENT.— 13 For purposes of this paragraph, an im- 14 provement in capacity or fuel efficiency 15 and performance with respect to a modern- 16 ized freight railcar shall be treated as a 17 significant improvement if— 18 ‘‘(I) such capacity or fuel effi- 19 ciency, as the case may be, is in- 20 creased by at least 8 percent, or 21 ‘‘(II) in the case of performance, 22 the qualified freight railcar meets the 23 requirements of the Association of 24 American Railroads Standard S–286 25 VerDate Sep 11 2014 23:29 Sep 17, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H8082.IH H8082 tkelley on DSKBCP9HB2PROD with BILLS 8 •HR 8082 IH or is modernized to meet the design 1 standards set forth in final rule HM– 2 251 of the Pipeline and Hazardous 3 Materials Safety Administration (as 4 amended by HM–251C). 5 ‘‘(C) MODERNIZED.—The term ‘modern- 6 ized’ means a modification, retrofit, conversion 7 or rebuild for the purpose of meeting capacity, 8 fuel efficiency, or performance criteria identified 9 in subparagraph (B)(ii). 10 ‘‘(8) QUALIFIED FREIGHT RAILCAR MOD- 11 ERNIZATION EXPENDITURE.—The term ‘qualified 12 freight railcar significant improvement expenditure’ 13 means any amount paid or incurred— 14 ‘‘(A) in connection with the modernization 15 of a freight railcar resulting in such railcar 16 being designated a qualified freight railcar, and 17 ‘‘(B) which is properly chargeable to a cap- 18 ital account with respect to such freight railcar. 19 ‘‘(9) QUALIFIED FACILITY.—The term ‘quali- 20 fied facility’ means a facility that is not owned by 21 an entity that would be ineligible for an award of a 22 contract or subcontract under 49 U.S.C. 5323(u). 23 ‘‘(c) SPECIAL RULES.— 24 VerDate Sep 11 2014 23:29 Sep 17, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H8082.IH H8082 tkelley on DSKBCP9HB2PROD with BILLS 9 •HR 8082 IH ‘‘(1) DENIAL OF DOUBLE BENEFIT.—No credit 1 shall be allowed under subsection (a) for any ex- 2 pense for which a deduction or credit is allowed 3 under any other provision of this chapter. 4 ‘‘(2) CREDIT TREATED AS REFUNDABLE.—In 5 the case of any taxable year in which the taxpayer 6 is allowed a credit under subsection (a)(1) and is 7 unable to utilize such credit as an offset to their reg- 8 ular tax liability, the taxpayer may elect to have 9 such credit treated as an overpayment and refunded 10 to the taxpayer for such year. 11 ‘‘(3) BASIS ADJUSTMENT.—For purposes of 12 this subtitle, if a credit is allowed under subsection 13 (a)(1) with respect to any qualified freight railcar, 14 the basis of such railcar shall be reduced by the 15 amount of the credit so allowed. 16 ‘‘(4) SALE-LEASEBACK.—For purposes of sub- 17 section (a)(1), if any qualified freight railcar is— 18 ‘‘(A) originally placed in service by a per- 19 son after the date of the enactment of this sec- 20 tion, and 21 ‘‘(B) sold and leased back by such person 22 within 3 months after the railcars are originally 23 placed in service (or, in the case of more than 24 one railcar subject to the same lease, within 3 25 VerDate Sep 11 2014 23:29 Sep 17, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H8082.IH H8082 tkelley on DSKBCP9HB2PROD with BILLS 10 •HR 8082 IH months after the date the final railcar is placed 1 in service, so long as the period between the 2 time the first railcar is placed in service and the 3 time the last railcar is placed in service does 4 not exceed 24 months), 5 such railcar shall be treated as originally placed in 6 service not earlier than the date on which such rail- 7 car is used under the leaseback referred to in this 8 paragraph. 9 ‘‘(5) SYNDICATION.—For purposes of sub- 10 section (a)(1), if— 11 ‘‘(A) any qualified freight railcar is origi- 12 nally placed in service after the date of enact- 13 ment of this section by the lessor of such rail- 14 car, 15 ‘‘(B) such railcar is sold by such lessor or 16 any subsequent purchaser within 3 months 17 after the date such railcar was originally placed 18 in service (or, in the case of more than one rail- 19 car subject to the same lease, within 3 months 20 after the date the final railcar is placed in serv- 21 ice and the time the last railcar is placed in 22 service does not exceed 12 months), and 23 ‘‘(C) the user of such railcar after the last 24 sale during such 3-month period remains the 25 VerDate Sep 11 2014 23:29 Sep 17, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H8082.IH H8082 tkelley on DSKBCP9HB2PROD with BILLS 11 •HR 8082 IH same as when such railcar was originally placed 1 in service, such railcars shall be treated as 2 originally placed in service not earlier than the 3 date of such last sale. 4 ‘‘(6) ENTITIES OWNED OR CONTROLLED BY 5 STATE-OWNED ENTERPRISES INELIGIBLE.—No cred- 6 it under subsection (a) shall be allowed to any tax- 7 payer that would be ineligible for an award of a con- 8 tract or subcontract under 49 U.S.C. 5323(u). 9 ‘‘(d) TERMINATION.—This section shall not apply to 10 any qualifying railcar facility equipment and technology 11 modernization amount after December 31, 2023, or to any 12 qualifying replacement or modernization amount, or any 13 qualifying scrap amount after December 31, 2024.’’. 14 (b) CREDIT ALLOWED AS BUSINESS CREDIT.—Sec- 15 tion 38(b) of the Internal Revenue Code of 1986 (relating 16 to current year business credit) is amended by striking 17 ‘‘plus’’ at the end of paragraph (32), by striking the period 18 at the end of paragraph (33) and inserting ‘‘, plus’’ and 19 by inserting at the end thereof the following new para- 20 graph: 21 ‘‘(34) the qualified freight railcar credit deter- 22 mined under section 45U.’’. 23 (c) COORDINATION WITH SECTION 55.—Section 24 38(c)(4)(B) of the Internal Revenue Code of 1986 is 25 VerDate Sep 11 2014 23:29 Sep 17, 2020 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H8082.IH H8082 tkelley on DSKBCP9HB2PROD with BILLS 12 •HR 8082 IH amended by redesignating clauses (x), (xi), and (xii) as 1 clauses (xi), (xii), and (xiii) respectively, and by inserting 2 after clause (ix) the following new clause: 3 ‘‘(x) the qualified freight railcar credit 4 determined under section 45U,’’. 5 (d) CLERICAL AMENDMENT.—The table of sections 6 for subpart D of part IV of subchapter A of chapter 1 7 of the Internal Revenue Code of 1986 is amended by in- 8 serting after the item relating to section 45T the following 9 new item: 10 ‘‘Sec. 45U. Qualified freight railcar credit.’’. (e) EFFECTIVE DATE.—The amendments made by 11 this section shall apply to property placed in service, and 12 amounts paid or incurred, after April 30, 2020. 13 SEC. 3. REPORT ON THE QUALIFIED FREIGHT RAILCAR 14 CREDIT. 15 (a) IN GENERAL.—Not later than 3 years after the 16 date of the enactment of this Act, the Secretary of the 17 Treasury (or the Secretary’s delegate), shall submit to the 18 Committee on Ways and Means of the House of Rep- 19 resentatives and the Committee on Finance of the Senate 20 a report on activity with respect to the qualified freight 21 railcar credit under section 36D of the Internal Revenue 22 Code of 1986. 23 VerDate Sep 11 2014 23:29 Sep 17, 2020 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H8082.IH H8082 tkelley on DSKBCP9HB2PROD with BILLS 13 •HR 8082 IH (b) REPORT CONTENTS.—The report submitted 1 under [Text truncated for display. Full text available on Congress.gov.]