[Congressional Record Volume 149, Number 138 (Thursday, October 2, 2003)]
[Senate]
[Pages S12380-S12381]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SMITH:
  S. 1703. A bill to amend the Internal Revenue Code of 1986 to provide 
a credit against income tax for expenditures for the maintenance of 
railroad tracks of Class II and Class III railroads; to the Committee 
on Finance.
  Mr. SMITH. Mr. President, I rise today with Senators Wyden, 
Brownback, Specter, and Burns to introduce the Local Railroad 
Rehabilitation and Investment Act. The bill provides a Federal tax 
credit for short line railroad rehabilitation and addresses a critical 
need in small town America.
  There are some 500 short line railroads serving large areas of the 
country that are no longer served by the large Class I railroads. These 
railroads keep our farmers and our small businesses connected to the 
national main line railroad system and are the only alternative to 
increasing truck traffic on local roads.
  Many of today's short lines were once the light density branch lines 
of the large Class I railroads. As Class I systems began to lose money, 
these branch lines received little investment and were gradually 
abandoned. As an alternative to abandonment, the Federal Government 
encouraged spinning off these lines to form new local railroads that 
would preserve service and jobs.
  Today, this local service is threatened due to the introduction of 
the new, heavier 286,000-pound railcar that the Class I's are making 
the new industry standard. Because of the interconnectivity of our 
Nation's rail network, short lines are forced to use these heavier 
cars. This places an added strain on track structure and makes 
rehabilitation even more important and more urgent. Studies indicate 
that it will take $7 billion in new investment for our nation's short 
lines to accommodate these heavier rail cars.
  My legislation is not intended to fund this entire rehabilitation. 
Rather, it is intended to help small railroads make the improvements 
required to grow traffic so they can earn the additional investment 
income needed to complete the $7 billion capital upgrade.
  Short lines operate 50,000 miles of track in 49 states, employ over 
23,000 workers at an average wage of $47,000, and earn $3 billion in 
annual revenue. Railroading is one of the most capital-intensive 
industries in the country. That capital effort is also labor intensive 
and my legislation will result in the immediate creation of jobs needed 
to undertake these rehabilitation projects.
  The major provisions of the Local Railroad Rehabilitation and 
Investment Act include:
  Authorization of a federal tax credit against qualified railroad 
track maintenance expenditures paid or incurred by a taxpayer during 
taxable years 2004 to 2008.
  The qualified railroad track maintenance expenditures include 
expenditures, whether or not otherwise chargeable to capital account, 
for maintaining or upgrading railroad track, including roadbed, bridges 
and related structures, owned or leased by the taxpayer of a Class II 
or Class III railroad.
  The total tax credit is capped at $10,000 for every mile of railroad 
track owned or leased by a Class II or Class III railroad, provided 
that the expenditure is certified by the State as part of an essential 
rail upgrade. For example, a 20-mile railroad qualifies for a $200,000 
credit.
  And, to maximize private investment in this critical infrastructure, 
the bill allows railroads that are unable to fully utilize credits 
earned to transfer such credits to other railroads, railroad shippers, 
or railroad suppliers and contractors.
  For rural America, the specter of losing rail access is a serious 
matter. As characterized in the American Association of State Highway 
Transportation Officials' (AASHTO) recent Freight-Rail Bottom Line 
Report, short lines ``often provide the first and last service miles in 
the door-to-door collection and distribution of railcars.'' The 
Association of American Railroads estimates that short lines originate 
or terminate one out of every four carloads moved by the domestic 
railroad industry. Preserving short line rail service is important to 
the national transportation system; it is absolutely critical to the 
rural transportation system. This legislation provides a modest and 
efficient way to help the short line industry help itself.
  I urge my colleagues to join me and support this important 
legislation. I

[[Page S12381]]

ask unanimous consent that the text of the legislation be printed in 
the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1703

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Local Railroad 
     Rehabilitation and Investment Act of 2003''.

     SEC. 2. CREDIT FOR MAINTENANCE OF RAILROAD TRACK.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     business-related credits) is amended by adding at the end the 
     following new section:

     ``SEC. 45G. RAILROAD TRACK MAINTENANCE CREDIT.

       ``(a) General Rule.--For purposes of section 38, the 
     railroad track maintenance credit determined under this 
     section for the taxable year is the amount of qualified 
     railroad track maintenance expenditures paid or incurred by 
     the taxpayer during the taxable year.
       ``(b) Limitation.--The credit allowed under subsection (a) 
     shall not exceed the product of--
       ``(1) $10,000, and
       ``(2) the number of miles of railroad track owned or leased 
     by the taxpayer as of the close of the taxable year.
       ``(c) Qualified Railroad Track Maintenance Expenditures.--
     For purposes of this section, the term `qualified railroad 
     track maintenance expenditures' means expenditures (whether 
     or not otherwise chargeable to capital account) for 
     maintaining railroad track (including roadbed, bridges, and 
     related track structures) owned or leased by the taxpayer of 
     Class II or Class III railroads (as determined by the Surface 
     Transportation Board).
       ``(d) Controlled Groups.--For purposes of subsection (b), 
     rules similar to the rules of paragraph (1) of section 41(f) 
     shall apply for purposes of this subsection.
       ``(e) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is allowed under this section with respect to any 
     railroad track, the basis of such track shall be reduced by 
     the amount of the credit so allowed.
       ``(f) Application of Section.--This section shall apply to 
     qualified railroad track maintenance expenditures paid or 
     incurred during taxable years beginning after December 31, 
     2003, and before January 1, 2009.
       ``(g) Credit Transferability.--
       ``(1) In general.--Any credit allowable under this section 
     may be transferred as provided in this subsection, and the 
     determination as to whether the credit is allowable shall be 
     made without regard to the tax-exempt status of the 
     transferor.
       ``(2) Transfer to eligible taxpayer.--Any credit 
     transferred under paragraph (1) shall be transferred to an 
     eligible taxpayer. Any credit so transferred shall be allowed 
     to the transferee, but the transferee may not assign such 
     credit to any other person.
       ``(3) Eligible taxpayer.--For purposes of this subsection, 
     the term `eligible taxpayer' means--
       ``(A) any person who transports property using the rail 
     facilities of the taxpayer or who furnishes railroad-related 
     property or services to the taxpayer, and
       ``(B) any Class II or Class III railroad.
       ``(4) Minimum price for transfer.--No transfer shall be 
     allowed under this subsection unless the transferor receives 
     compensation for the credit transfer equal to at least 50 
     percent of the amount of credit transferred. The excess of 
     the amount of credit transferred over the compensation 
     received by the transferor for such transfer shall be 
     included in the gross income of the transferee.''.
       (b) Limitation on Carryback.--Section 39(d) of the Internal 
     Revenue Code of 1986 (relating to transition rules) is 
     amended by adding at the end the following new paragraph:
       ``(11) No carryback of railroad track maintenance credit 
     before effective date.--No portion of the unused business 
     credit for any taxable year which is attributable to the 
     railroad track maintenance credit determined under section 
     45G may be carried to a taxable year beginning before January 
     1, 2004.''.
       (c) Conforming Amendments.--
       (1) Section 38(b) of the Internal Revenue Code of 1986 
     (relating to general business credit) is amended by striking 
     ``plus'' at the end of paragraph (14), by striking the period 
     at the end of paragraph (15) and inserting ``, plus'', and by 
     adding at the end the following new paragraph:
       ``(16) the railroad track maintenance credit determined 
     under section 45G(a).''.
       (2) Subsection (a) of section 1016 of such Code is amended 
     by striking ``and'' at the end of paragraph (27), by striking 
     the period at the end of paragraph (28) and inserting ``, 
     and'', and by adding at the end the following new paragraph:
       ``(29) in the case of railroad track with respect to which 
     a credit was allowed under section 45G, to the extent 
     provided in section 45G(e).''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 of the Internal 
     Revenue Code of 1986 is amended by inserting after the item 
     relating to section 45F the following new item:

``Sec. 45G. Railroad track maintenance credit.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.
                                 ______