I 

118TH CONGRESS 

1ST SESSION H. R. 838 

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encourage the replacement or modernization of inefficient, outdated 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 

FEBRUARY 6, 2023 

Mr. LAHOOD (for himself, Mr. SCHNEIDER, Mr. BACON, Mr. BISHOP of Georgia, Mr. BANKS, Mr. BLUMENAUER, Mr. CARL, Ms. BONAMICI, Mr. 

CRAWFORD, Mr. CUELLAR, Mr. ELLZEY, Mr. KILDEE, Mr. FERGUSON, 

Mr. PANETTA, Ms. GRANGER, Ms. SA ́NCHEZ, Mr. GRAVES of Missouri, 

Ms. SEWELL, Mr. TONY GONZALES of Texas, Ms. TITUS, Mr. HUDSON, 

Ms. DAVIDS of Kansas, Mr. HERN, Mr. HUNT, Mr. MCCAUL, Mr. 

MORAN, Mr. MURPHY, Mr. ROGERS of Alabama, Mr. WILLIAMS of Texas, 

and Ms. VAN DUYNE) 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a tax credit to encourage the replacement or modernization of inefficient, outdated freight railcars, and for other 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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Freight Rail Assist5 ance and Investment to Launch Coronavirus-era Activity 


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1 and Recovery Act of 2023’’ or the ‘‘Freight RAILCAR 

2 Act of 2023’’. 

3 SEC. 2. FREIGHT RAILCAR MODERNIZATION CREDIT. 

4 (a) IN GENERAL.—Subpart D of part IV of sub5 chapter A of chapter 1 of the Internal Revenue Code of 

6 1986 is amended by adding at the end the following new 

7 section: 

8 ‘‘SEC. 45BB. FREIGHT RAILCAR MODERNIZATION CREDIT. 

9 ‘‘(a) IN GENERAL.—For purposes of section 38, the 

10 freight railcar modernization credit determined under this 

11 section for the taxable year is an amount equal to 10 per12 cent of the taxpayer’s freight railcar fleet modernization 

13 expenses. 

14 ‘‘(b) LIMITATION.—No more than 2,000 qualified 

15 freight railcars per taxpayer may be taken into account 

16 for purposes of determining the credit under subsection 

17 (a) with respect to a taxable year. 

18 ‘‘(c) DEFINITIONS.—For purposes of this section— 

19 ‘‘(1) FREIGHT RAILCAR FLEET MODERNIZATION

20 EXPENSES.—The term ‘freight railcar fleet mod21 ernization expenses’ means the sum of the qualifying 

22 railcar replacement and modernization amount. 

23 ‘‘(2) QUALIFYING RAILCAR REPLACEMENT AND

24 MODERNIZATION AMOUNT.—The term ‘qualifying 


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1 railcar replacement and modernization amount’ 

2 means— 

3 ‘‘(A) the basis of any qualified newly built 

4 replacement railcar placed in service by the tax5 payer during the taxable year, plus 

6 ‘‘(B) the qualified railcar modernization 

7 expenditures of the taxpayer for the taxable 

8 year. 

9 ‘‘(3) QUALIFIED NEWLY BUILT REPLACEMENT

10 RAILCAR.—The term ‘qualified newly built replace11 ment railcar’ means a qualified freight railcar 

12 which— 

13 ‘‘(A) is built after the date of the enact14 ment of this section, 

15 ‘‘(B) is ordered or originally placed in serv16 ice before the date that is three years after the 

17 date of the enactment of this section, and 

18 ‘‘(C) replaces two freight railcars owned by 

19 the taxpayer that— 

20 ‘‘(i) were in service within the 48 

21 months preceding the beginning of the tax22 able year, and 

23 ‘‘(ii) which were both scrapped and 

24 permanently removed from the AAR Umler 


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1 System master file during such taxable 

2 year. 

3 ‘‘(4) QUALIFIED FREIGHT RAILCAR.— 

4 ‘‘(A) IN GENERAL.—The term ‘qualified 

5 freight railcar’ means a freight railcar that— 

6 ‘‘(i) is either acquired or modernized 

7 by the taxpayer after the date of the enact8 ment of this section, 

9 ‘‘(ii) meets the significant improve10 ment requirements for capacity, fuel effi11 ciency, or performance of subparagraph 

12 (B), 

13 ‘‘(iii) was built in a qualified facility, 

14 and 

15 ‘‘(iv) with respect to which no credit 

16 under this section was previously claimed 

17 by any taxpayer. 

18 ‘‘(B) SIGNIFICANT IMPROVEMENT.—For 

19 purposes of this paragraph, an improvement in 

20 capacity or fuel efficiency and performance with 

21 respect to a modernized freight railcar is a sig22 nificant improvement if— 

23 ‘‘(i) such capacity or fuel efficiency, as 

24 the case may be, is increased by at least 8 

25 percent, or 


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1 ‘‘(ii) in the case of performance, the 

2 qualified freight railcar meets the require3 ments of the Association of American Rail4 roads Standard S–286 or is modernized to 

5 meet the design standards set forth in final 

6 rule HM–251 of the Pipeline and Haz7 ardous Materials Safety Administration (as 

8 amended by HM–251C). 

9 ‘‘(C) MODERNIZED.—The term ‘modern10 ized’ means modified, retrofitted, converted or 

11 rebuilt for the purpose of meeting the signifi12 cant improvement criteria of subparagraph (B). 

13 ‘‘(5) QUALIFIED RAILCAR MODERNIZATION EX14 PENDITURE.—The term ‘qualified railcar moderniza15 tion expenditure’ means any amount paid or in16 curred— 

17 ‘‘(A) in connection with the modernization 

18 of a freight railcar resulting in such railcar 

19 being designated a qualified freight railcar, and 

20 ‘‘(B) which is properly chargeable to a cap21 ital account with respect to such freight railcar. 

22 ‘‘(6) QUALIFIED FACILITY.—The term ‘quali23 fied facility’ means a facility that is not owned or 

24 leased by an entity that would be ineligible for an 


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1 award of a contract or subcontract under 49 U.S.C. 

2 5323(u). 

3 ‘‘(d) SPECIAL RULES.— 

4 ‘‘(1) DENIAL OF DOUBLE BENEFIT.—No credit 

5 shall be allowed under subsection (a) for any ex6 pense for which a deduction or credit is allowed 

7 under any other provision of this chapter. 

8 ‘‘(2) BASIS ADJUSTMENT.—For purposes of 

9 this subtitle, if a credit is allowed under subsection 

10 (a) with respect to any qualified freight railcar, the 

11 basis of such railcar shall be reduced by the amount 

12 of the credit so allowed. 

13 ‘‘(3) SALE-LEASEBACK.—For purposes of sub14 section (a), if any qualified freight railcar is— 

15 ‘‘(A) originally placed in service by a per16 son after the date of the enactment of this sec17 tion, and 

18 ‘‘(B) sold and leased back by such person 

19 within 3 months after such railcar is originally 

20 placed in service (or, in the case of more than 

21 one railcar subject to the same lease, within 3 

22 months after the date the final railcar is placed 

23 in service, so long as the period between the 

24 time the first railcar is placed in service and the 

25 time the last railcar is placed in service does 


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1 not exceed 24 months), such railcar shall be 

2 treated as originally placed in service not earlier 

3 than the date on which such railcar is used 

4 under the leaseback referred to in this para5 graph. 

6 ‘‘(4) SYNDICATION.—For purposes of sub7 section (a), if— 

8 ‘‘(A) any qualified freight railcar is origi9 nally placed in service after the date of enact10 ment of this section by the lessor of such rail11 car, 

12 ‘‘(B) such railcar is sold by such lessor or 

13 any subsequent purchaser within 3 months 

14 after the date such railcar was originally placed 

15 in service (or, in the case of more than one rail16 car subject to the same lease, within 3 months 

17 after the date the final railcar is placed in serv18 ice and the time the last railcar is placed in 

19 service does not exceed 12 months), and 

20 ‘‘(C) the user of such railcar after the last 

21 sale during such 3-month period remains the 

22 same as when such railcar was originally placed 

23 in service, such railcars shall be treated as 

24 originally placed in service not earlier than the 

25 date of such last sale. 


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1 ‘‘(5) ENTITIES OWNED OR CONTROLLED BY

2 STATE-OWNED ENTERPRISES INELIGIBLE.—No cred3 it under subsection (a) shall be allowed to any tax4 payer that would be ineligible for an award of a con5 tract or subcontract under 49 U.S.C. 5323(u). 

6 ‘‘(e) TERMINATION.—This section shall not apply to 

7 any qualifying railcar replacement and modernization 

8 amount after the date that is three years after the date 

9 of the enactment of this section.’’. 

10 (b) CREDIT ALLOWED AS BUSINESS CREDIT.—Sec11 tion 38(b) of the Internal Revenue Code of 1986 (relating 

12 to current year business credit) is amended by striking 

13 ‘‘plus’’ at the end of paragraph (40), by striking the period 

14 at the end of paragraph (41) and inserting ‘‘, plus’’ and 

15 by inserting at the end thereof the following new para16 graph: 

17 ‘‘(42) the freight railcar modernization credit 

18 determined under section 45BB.’’. 

19 (c) COORDINATION WITH SECTION 55.—Section 

20 38(c)(4)(B) of the Internal Revenue Code of 1986 is 

21 amended by redesignating clauses (x), (xi), and (xii) as 

22 clauses (xi), (xii), and (xiii), respectively, and by inserting 

23 after clause (ix) the following new clause: 

24 ‘‘(x) the freight railcar modernization 

25 credit determined under section 45BB,’’. 


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1 (d) CLERICAL AMENDMENT.—The table of sections 

2 for subpart D of part IV of subchapter A of chapter 1 

3 of the Internal Revenue Code of 1986 is amended by in4 serting after the item relating to section 45AA the fol5 lowing new item: 

‘‘Sec. 45BB. Freight railcar modernization credit.’’. 

6 (e) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to property placed in service, and 

8 amounts paid or incurred, after December 31, 2022. 

9 SEC. 3. REPORT ON THE FREIGHT RAILCAR MODERNIZA10 TION CREDIT. 

11 (a) IN GENERAL.—Not later than 3 years after the 

12 date of the enactment of this Act, the Secretary of the 

13 Treasury (or the Secretary’s delegate), shall submit to the 

14 Committee on Ways and Means of the House of Rep15 resentatives and the Committee on Finance of the Senate 

16 a report on activity with respect to the qualified freight 

17 railcar credit under section 45BB of the Internal Revenue 

18 Code of 1986. 

19 (b) REPORT CONTENTS.—The report submitted 

20 under subsection (a) shall contain information with re21 spect to the following: 

22 (1) The number of times the credit was 

23 claimed. 

24 (2) The number of railcars scrapped as a result 

25 of the credit. 


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1 (3) The number of new railcars entered into 

2 contract as a result of the credit. 

3 (4) The number of new railcars built as a result 

4 of the credit. 

Æ 


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