U.S. Senate Seeks Shortline Tax Credits

WASHINGTON - May 13/04 - SNS -- The National Grain and Feed Association (NGFA) expressed pleasure with proposed changes to the U.S. tax code passed by the Senate, which would provide tax credits for shortline and regional railroads to upgrade track to handle 286,000-pound rail cars.

The NGFA organized support for the shortline rail infrastructure provision among the agricultural sector. In a May 7 letter to the leaders of the Senate Finance Committee and House Ways and Means Committee - which have jurisdiction over the rail tax credit provision - the NGFA noted that nearly 39% of farm products are shipped via shortline railroad at some point, and that more than 8,000 food, farm, lumber and chemical customers utilize shortline carriers. The letter also was signed by the American Farm Bureau Federation, National Association of Wheat Growers and The Fertilizer Institute.

"[R]ail lines are struggling to meet investment needs to upgrade their tracks to support the current shipping volume and to accommodate today's 286,000-pound rail cars," the groups wrote. They also noted that the costs for upgrading rail tracks throughout the shortline railroad network is estimated at $7 billion - far exceeding the $2.8 billion annual revenues generated by shortlines. "This disparity represents a serious threat to the long-term viability of many shortline railroads and their rural customers."

The shortline rail infrastructure provisions would provide a 30% tax credit of the qualified track maintenance expenditures paid or incurred - up to a limit of $3,500 per track mile - for Class II and III railroads, or any entity that transports products on or furnishes rail-related property or services to shortline and regional railroads. Track maintenance expenditures eligible for the tax credit include roadbeds, bridges and related track structures on track owned or leased by class II or III railroads as of Jan. 1, 2005. The bill includes a "no-carryback" provision to prevent using the tax credits for track maintenance that began in tax years starting before Jan. 1, 2005.

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