[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2289 Introduced in House (IH)]
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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encourage the replacement or modernization of inefficient, outdated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.
Blumenauer, Ms. Bonamici, Mr. Crawford, Mr. Rodney Davis of Illinois,
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encourage the replacement or modernization of inefficient, outdated
freight railcars, and for other purposes.
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 ``Freight Rail Assistance and
Investment to Launch Coronavirus-era Activity and Recovery Act of
2021'' or the ``Freight RAILCAR Act of 2021''.
SEC. 2. FREIGHT RAILCAR MODERNIZATION CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 is amended by adding at the end
the following new section:
``SEC. 45U. FREIGHT RAILCAR MODERNIZATION CREDIT.
``(a) General Rule.--For purposes of section 38, the freight
railcar modernization credit determined under this section for the
taxable year is an amount equal to 50 percent of the taxpayer's freight
railcar fleet modernization expenses.
``(b) Definitions.--For purposes of this section--
``(1) Freight railcar fleet modernization expenses.--The
term `freight railcar fleet modernization expenses' means the
sum of--
``(A) the qualifying railcar replacement and
modernization amount,
``(B) the qualifying scrap amount, and
``(C) the qualifying railcar facility and
technology modernization amount.
``(2) Qualifying railcar replacement and modernization
amount.--The term `qualifying railcar replacement and
modernization amount' means--
``(A) the basis of any qualified newly built
replacement railcar placed in service by the taxpayer
during the taxable year, plus
``(B) the qualified railcar modernization
expenditures of the taxpayer for the taxable year.
``(3) Qualifying scrap amount.--The term `qualifying scrap
amount' means--
``(A) the depreciated value or salvage value, as
applicable, of a qualified freight railcar (as such
value is defined and calculated in accordance with the
Association of American Railroads Interchange Rules)
which is scrapped by the taxpayer and permanently
removed from the AAR Umler System master file during
the taxable year, less
``(B) the sum of scrap and part out net proceeds
received by the taxpayer for such qualified freight
railcar. For purposes of this subparagraph, scrap
proceeds shall be calculated by using the Association
of American Railroads Office Manual per pound credits
for steel, stainless steel, and aluminum (as
applicable) in effect on the date railcar is scrapped.
``(4) Qualifying railcar facility and technology
modernization amount.--The term `qualifying railcar facility
equipment and technology modernization amount' means amounts
paid or incurred by the taxpayer for any railcar facility and
technology modernization property placed in service during the
taxable year.
``(A) Railcar facility and technology modernization
property.--The term `railcar facility and technology
modernization property' means property--
``(i) chargeable to capital account,
``(ii) placed in service by a qualified
railway supply company,
``(iii) the original use of which commences
with the taxpayer,
``(iv) which is used to modernize an
existing qualified facility or existing
railcars, and
``(v) is used for modernization purposes.
``(B) Modernization of existing qualified
facilities or existing railcars.--Property is used to
modernize an existing qualified facility or an existing
railcar if such property--
``(i) enables such facility to implement
enhanced controls to meet environmental
standards, including emissions limits under the
Clean Air Act or wastewater standards under the
Clean Water Act and corresponding State/local
requirements, or
``(ii) is associated with the deployment of
technological equipment used by any owner of a
freight railcar, or of an existing qualified
facility, to manufacture, repair, or modernize
railcars, or manufacture railcar components
that improve the efficiency, quality, or safety
of--
``(I) fleet management operations,
or
``(II) railcar or railcar component
manufacturing, repair, or modernization
operations conducted pursuant to
activity code certifications under the
Association of American Railroads
Manual of Standards and Recommended
Practice, Section C, Part III, Appendix
B (Specification M1002) or Association
of American Railroads Manual of
Standards and Recommended Practice,
Section J, Quality Assurance
(Specification M-1003).
``(C) Modernization purposes.--For purposes of this
paragraph, the following types of property shall be
considered as used for modernization purposes--
``(i) testing and reliability equipment
that facilitates the development of safer
railcars and railcar components by AAR
certified manufacturers, including accelerated
life-cycle testing equipment,
``(ii) innovative technological equipment
that generates data relating to the operating
conditions of rolling stock and communicates
such data in an efficient manner, with the goal
of improving railcar fleet safety, including
smart technology on cars to monitor conditions
such as leaks, equipment damage, or high
acceleration events,
``(iii) remote controlled technological
equipment that allows for inspections, cleaning
or repairs to railcars to be conducted
remotely,
``(iv) equipment which increases the
efficiency or capacity of, and enhances
environmental controls related to facilities
which conduct AAR certified blasting, cleaning,
coating, and painting railcar activities,
``(v) regenerative thermal oxidizers of
volatile organic compounds or hazardous air
pollutants, and
``(vi) innovative technological equipment
or software that will enhance the efficiency of
a railcar owner's fleet management systems,
including programs that map timing and routing
of railcars to repair shops or storage
facilities that improve efficiency of rail
transportation.
``(5) Qualified newly built replacement railcar.--The term
`qualified newly built replacement railcar' means a qualified
freight railcar which--
``(A) is built after the date of the enactment of
this section,
``(B) is ordered or originally placed in service
before January 1, 2025, and
``(C) replaces two freight railcars owned by the
taxpayer that--
``(i) were in service within the 48 months
preceding the beginning of the taxable year,
and
``(ii) which were both scrapped and
permanently removed from the AAR Umler System
master file during such taxable year.
``(6) Originates.--The term `originates' refers to the
country of origin of a part, component, subassembly or finished
product, as described in the Rules of Origin of Article 4.2 of
the United States-Mexico-Canada Agreement (19 U.S.C. 4531(c))
or any subsequent free trade agreement between the United
States, Mexico, and Canada.
``(7) Qualified railway supply company.--The term
`qualified railway supply company' means an entity that
manufactures, repairs, modernizes or owns freight railcars or
manufactures components for freight railcars, that is not an
entity that would be ineligible for an award of a contract or
subcontract under 49 U.S.C. 5323(u).
``(8) Qualified freight railcar.--
``(A) In general.--The term `qualified freight
railcar' means a freight railcar that--
``(i) is either acquired or modernized by
the taxpayer after the date of the enactment of
this section,
``(ii) meets the significant improvement
requirements for capacity, fuel efficiency, or
performance of subparagraph (B),
``(iii) originates from a qualified railway
supply company and was built in a qualified
facility, and
``(iv) with respect to which no credit
under this section was previously claimed by
any taxpayer.
``(B) Significant improvement.--For purposes of
this paragraph, an improvement in capacity or fuel
efficiency and performance with respect to a modernized
freight railcar is a significant improvement if--
``(i) such capacity or fuel efficiency, as
the case may be, is increased by at least 8
percent, or
``(ii) in the case of performance, the
qualified freight railcar meets the
requirements of the Association of American
Railroads Standard S-286 or is modernized to
meet the design standards set forth in final
rule HM-251 of the Pipeline and Hazardous
Materials Safety Administration (as amended by
HM-251C).
``(C) Modernized.--The term `modernized' means
modified, retrofitted, converted or rebuilt for the
purpose of meeting the significant improvement criteria
of subparagraph (B).
``(9) Qualified railcar modernization expenditure.--The
term `qualified railcar modernization expenditure' means any
amount paid or incurred--
``(A) in connection with the modernization of a
freight railcar resulting in such railcar being
designated a qualified freight railcar, and
``(B) which is properly chargeable to a capital
account with respect to such freight railcar.
``(10) Qualified facility.--The term `qualified facility'
means a facility that is located within the United States and
owned by any entity other than an entity that would be
ineligible for an award of a contract or subcontract under 49
U.S.C. 5323(u).
``(c) Special Rules.--
``(1) Denial of double benefit.--No credit shall be allowed
under subsection (a) for any expense for which a deduction or
credit is allowed under any other provision of this chapter.
``(2) Credit treated as refundable.--In the case of any
taxable year in which the taxpayer is allowed a credit under
subsection (a) and is unable to use such credit as an offset to
the regular tax liability of such taxpayer, such taxpayer may
elect to have such credit treated as an overpayment and
refunded to the taxpayer for such year.
``(3) Basis adjustment.--For purposes of this subtitle, if
a credit is allowed under subsection (a) with respect to any
qualified freight railcar, the basis of such railcar shall be
reduced by the amount of the credit so allowed.
``(4) Sale-leaseback.--For purposes of subsection (a), if
any qualified freight railcar is--
``(A) originally placed in service by a person
after the date of the enactment of this section, and
``(B) sold and leased back by such person within 3
months after such railcar is originally placed in
service (or, in the case of more than one railcar
subject to the same lease, within 3 months after the
date the final railcar is placed in service, so long as
the period between the time the first railcar is placed
in service and the time the last railcar is placed in
service does not exceed 24 months), such railcar shall
be treated as originally placed in service not earlier
than the date on which such railcar is used under the
leaseback referred to in this paragraph.
``(5) Syndication.--For purposes of subsection (a), if--
``(A) any qualified freight railcar is originally
placed in service after the date of enactment of this
section by the lessor of such railcar,
``(B) such railcar is sold by such lessor or any
subsequent purchaser within 3 months after the date
such railcar was originally placed in service (or, in
the case of more than one railcar subject to the same
lease, within 3 months after the date the final railcar
is placed in service and the time the last railcar is
placed in service does not exceed 12 months), and
``(C) the user of such railcar after the last sale
during such 3-month period remains the same as when
such railcar was originally placed in service, such
railcars shall be treated as originally placed in
service not earlier than the date of such last sale.
``(6) Entities owned or controlled by state-owned
enterprises ineligible.--No credit under subsection (a) shall
be allowed to any taxpayer that would be ineligible for an
award of a contract or subcontract under 49 U.S.C. 5323(u).
``(d) Termination.--This section shall not apply to any qualifying
railcar facility equipment and technology modernization amount after
December 31, 2024, or to any qualifying railcar replacement and
modernization amount, or any qualifying scrap amount after December 31,
2025.''.
(b) Credit Allowed as Business Credit.--Section 38(b) of the
Internal Revenue Code of 1986 (relating to current year business
credit) is amended by striking ``plus'' at the end of paragraph (32),
by striking the period at the end of paragraph (33) and inserting ``,
plus'' and by inserting at the end thereof the following new paragraph:
``(34) the freight railcar modernization credit determined
under section 45U.''.
(c) Coordination With Section 55.--Section 38(c)(4)(B) of the
Internal Revenue Code of 1986 is amended by redesignating clauses (x),
(xi), and (xii) as clauses (xi), (xii), and (xiii) respectively, and by
inserting after clause (ix) the following new clause:
``(x) the freight railcar modernization
credit determined under section 45U,''.
(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 45T the
following new item:
``Sec. 45U. Freight railcar modernization credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to property placed in service, and amounts paid or incurred,
after April 30, 2021.
SEC. 3. REPORT ON THE FREIGHT RAILCAR MODERNIZATION CREDIT.
(a) In General.--Not later than 3 years after the date of the
enactment of this Act, the Secretary of the Treasury (or the
Secretary's delegate), shall submit to the Committee on Ways and Means
of the House of Representatives and the Committee on Finance of the
Senate a report on activity with respect to the qualified freight
railcar credit under section 45U of the Internal Revenue Code of 1986.
(b) Report Contents.--The report submitted under subsection (a)
shall contain information with respect to the following:
(1) The number of times the credit was claimed.
(2) The number of railcars scrapped as a result of the
credit.
(3) The number of new railcars entered into contract as a
result of the credit.
(4) The number of new railcars built as a result of the
credit.
(5) The number of facilities modified as a result of the
credit.
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