To the Internal Revenue Service regarding shortline railroad tax credits

To the Internal Revenue Service regarding shortline railroad tax credits

The following comments were submitted to the Internal Revenue Service on December 7, 2006. They express concern that IRS would reduce utility of the tax credit for short lines by making it impossible for shippers, contractors and suppliers to benefit from the credit while investing in rail infrastructure improvements. The credit was enacted in late 2004, and has operated thus far without regulations. All comments submitted on this subject are at the Federal Government’s regulations webpage [put “Railroad Track Maintenance Credit” (no quotations) into the keyword search field and click the Submit button; click on yellow button under “Comments” at the far right of the page].

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The National Association of Railroad Passengers, an organization with approximately 20,000 individual members, has worked since 1967 for a strong U.S. passenger rail network. I am responding on behalf of the Association to your request for comments on the proposed and temporary regulations under section 45G of the Internal Revenue Code published in the Federal Register on September 8, 2006. 

Details:
REG-142270-05
RIN 1545-BE90
Railroad Track Maintenance Credit

We oppose the proposed and temporary regulations relating to the “reimbursement rule” (§1.45G-1T(c)(3)(ii))). We believe these regulations would inhibit railroad customers, contractors and suppliers from funding track rehabilitation. Their ability to fund such work is important for the viability of this tax credit, a rare example of federal policy that is supportive of rail development. 

A healthy rail freight network:
• is essential if passenger rail is to develop properly in the U.S., and
• serves the public interest in its own right, due to rail’s energy and environmental advantages, as well as to the important capacity that rail lines add to the nation’s transportation system.
Due to the expansion of both the national passenger rail market and the freight rail market, the need for rail infrastructure is growing dramatically. Public policy should encourage its further development. The current rehabilitation tax credit has helped do this. 

Rail infrastructure development is particularly important because, until recently, railroads were tearing up track to save money when traffic was declining. Moreover, many of the tracks now owned by short lines formerly were low priority lines of major railroads and as such were allowed to deteriorate. We believe short lines are important both because some currently handle passenger trains—more may in the future—and because all short lines are an integral part of the nation’s overall railroad network.

Again, we strongly oppose this reimbursement rule and we respectfully ask that it be withdrawn.  Thank you for considering our views.