I 

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encourage the replacement or modernization of inefficient, outdated 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a tax credit to encourage the replacement or modernization of inefficient, outdated freight railcars, and for other 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

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 

6 and Recovery Act of 2021’’ or the ‘‘Freight RAILCAR 

7 Act of 2021’’. 


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1 SEC. 2. FREIGHT RAILCAR MODERNIZATION CREDIT. 

2 (a) IN GENERAL.—Subpart D of part IV of sub3 chapter A of chapter 1 of the Internal Revenue Code of 

4 1986 is amended by adding at the end the following new 

5 section: 

6 ‘‘SEC. 45U. FREIGHT RAILCAR MODERNIZATION CREDIT. 

7 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

8 the freight railcar modernization credit determined under 

9 this section for the taxable year is an amount equal to 

10 50 percent of the taxpayer’s freight railcar fleet mod11 ernization expenses. 

12 ‘‘(b) DEFINITIONS.—For purposes of this section— 

13 ‘‘(1) FREIGHT RAILCAR FLEET MODERNIZATION

14 EXPENSES.—The term ‘freight railcar fleet mod15 ernization expenses’ means the sum of— 

16 ‘‘(A) the qualifying railcar replacement 

17 and modernization amount, 

18 ‘‘(B) the qualifying scrap amount, and 

19 ‘‘(C) the qualifying railcar facility and 

20 technology modernization amount. 

21 ‘‘(2) QUALIFYING RAILCAR REPLACEMENT AND

22 MODERNIZATION AMOUNT.—The term ‘qualifying 

23 railcar replacement and modernization amount’ 

24 means— 


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

2 replacement railcar placed in service by the tax3 payer during the taxable year, plus 

4 ‘‘(B) the qualified railcar modernization 

5 expenditures of the taxpayer for the taxable 

6 year. 

7 ‘‘(3) QUALIFYING SCRAP AMOUNT.—The term 

8 ‘qualifying scrap amount’ means— 

9 ‘‘(A) the depreciated value or salvage 

10 value, as applicable, of a qualified freight rail11 car (as such value is defined and calculated in 

12 accordance with the Association of American 

13 Railroads Interchange Rules) which is scrapped 

14 by the taxpayer and permanently removed from 

15 the AAR Umler System master file during the 

16 taxable year, less 

17 ‘‘(B) the sum of scrap and part out net 

18 proceeds received by the taxpayer for such 

19 qualified freight railcar. For purposes of this 

20 subparagraph, scrap proceeds shall be cal21 culated by using the Association of American 

22 Railroads Office Manual per pound credits for 

23 steel, stainless steel, and aluminum (as applica24 ble) in effect on the date railcar is scrapped. 


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1 ‘‘(4) QUALIFYING RAILCAR FACILITY AND

2 TECHNOLOGY MODERNIZATION AMOUNT.—The term 

3 ‘qualifying railcar facility equipment and technology 

4 modernization amount’ means amounts paid or in5 curred by the taxpayer for any railcar facility and 

6 technology modernization property placed in service 

7 during the taxable year. 

8 ‘‘(A) RAILCAR FACILITY AND TECHNOLOGY

9 MODERNIZATION PROPERTY.—The term ‘railcar 

10 facility and technology modernization property’ 

11 means property— 

12 ‘‘(i) chargeable to capital account, 

13 ‘‘(ii) placed in service by a qualified 

14 railway supply company, 

15 ‘‘(iii) the original use of which com16 mences with the taxpayer, 

17 ‘‘(iv) which is used to modernize an 

18 existing qualified facility or existing rail19 cars, and 

20 ‘‘(v) is used for modernization pur21 poses. 

22 ‘‘(B) MODERNIZATION OF EXISTING

23 QUALIFIED FACILITIES OR EXISTING RAIL24 CARS.—Property is used to modernize an existVerDate Sep 11 2014 17:39 Jun 11, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2289.IH H2289

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1 ing qualified facility or an existing railcar if 

2 such property— 

3 ‘‘(i) enables such facility to implement 

4 enhanced controls to meet environmental 

5 standards, including emissions limits under 

6 the Clean Air Act or wastewater standards 

7 under the Clean Water Act and cor8 responding State/local requirements, or 

9 ‘‘(ii) is associated with the deployment 

10 of technological equipment used by any 

11 owner of a freight railcar, or of an existing 

12 qualified facility, to manufacture, repair, 

13 or modernize railcars, or manufacture rail14 car components that improve the effi15 ciency, quality, or safety of— 

16 ‘‘(I) fleet management oper17 ations, or 

18 ‘‘(II) railcar or railcar component 

19 manufacturing, repair, or moderniza20 tion operations conducted pursuant to 

21 activity code certifications under the 

22 Association of American Railroads 

23 Manual of Standards and Rec24 ommended Practice, Section C, Part 

25 III, Appendix B (Specification 


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1 M1002) or Association of American 

2 Railroads Manual of Standards and 

3 Recommended Practice, Section J, 

4 Quality Assurance (Specification M– 

5 1003). 

6 ‘‘(C) MODERNIZATION PURPOSES.—For 

7 purposes of this paragraph, the following types 

8 of property shall be considered as used for mod9 ernization purposes— 

10 ‘‘(i) testing and reliability equipment 

11 that facilitates the development of safer 

12 railcars and railcar components by AAR 

13 certified manufacturers, including acceler14 ated life-cycle testing equipment, 

15 ‘‘(ii) innovative technological equip16 ment that generates data relating to the 

17 operating conditions of rolling stock and 

18 communicates such data in an efficient 

19 manner, with the goal of improving railcar 

20 fleet safety, including smart technology on 

21 cars to monitor conditions such as leaks, 

22 equipment damage, or high acceleration 

23 events, 

24 ‘‘(iii) remote controlled technological 

25 equipment that allows for inspections, 


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1 cleaning or repairs to railcars to be con2 ducted remotely, 

3 ‘‘(iv) equipment which increases the 

4 efficiency or capacity of, and enhances en5 vironmental controls related to facilities 

6 which conduct AAR certified blasting, 

7 cleaning, coating, and painting railcar ac8 tivities, 

9 ‘‘(v) regenerative thermal oxidizers of 

10 volatile organic compounds or hazardous 

11 air pollutants, and 

12 ‘‘(vi) innovative technological equip13 ment or software that will enhance the effi14 ciency of a railcar owner’s fleet manage15 ment systems, including programs that 

16 map timing and routing of railcars to re17 pair shops or storage facilities that im18 prove efficiency of rail transportation. 

19 ‘‘(5) QUALIFIED NEWLY BUILT REPLACEMENT

20 RAILCAR.—The term ‘qualified newly built replace21 ment railcar’ means a qualified freight railcar 

22 which— 

23 ‘‘(A) is built after the date of the enact24 ment of this section, 


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1 ‘‘(B) is ordered or originally placed in serv2 ice before January 1, 2025, and 

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

4 the taxpayer that— 

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

6 months preceding the beginning of the tax7 able year, and 

8 ‘‘(ii) which were both scrapped and 

9 permanently removed from the AAR Umler 

10 System master file during such taxable 

11 year. 

12 ‘‘(6) ORIGINATES.—The term ‘originates’ refers 

13 to the country of origin of a part, component, sub14 assembly or finished product, as described in the 

15 Rules of Origin of Article 4.2 of the United States– 

16 Mexico–Canada Agreement (19 U.S.C. 4531(c)) or 

17 any subsequent free trade agreement between the 

18 United States, Mexico, and Canada. 

19 ‘‘(7) QUALIFIED RAILWAY SUPPLY COMPANY.— 

20 The term ‘qualified railway supply company’ means 

21 an entity that manufactures, repairs, modernizes or 

22 owns freight railcars or manufactures components 

23 for freight railcars, that is not an entity that would 

24 be ineligible for an award of a contract or sub25 contract under 49 U.S.C. 5323(u). 


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1 ‘‘(8) QUALIFIED FREIGHT RAILCAR.— 

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

3 freight railcar’ means a freight railcar that— 

4 ‘‘(i) is either acquired or modernized 

5 by the taxpayer after the date of the enact6 ment of this section, 

7 ‘‘(ii) meets the significant improve8 ment requirements for capacity, fuel effi9 ciency, or performance of subparagraph 

10 (B), 

11 ‘‘(iii) originates from a qualified rail12 way supply company and was built in a 

13 qualified facility, and 

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

15 under this section was previously claimed 

16 by any taxpayer. 

17 ‘‘(B) SIGNIFICANT IMPROVEMENT.—For 

18 purposes of this paragraph, an improvement in 

19 capacity or fuel efficiency and performance with 

20 respect to a modernized freight railcar is a sig21 nificant improvement if— 

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

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

24 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 ‘‘(9) 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 ‘‘(10) QUALIFIED FACILITY.—The term ‘quali23 fied facility’ means a facility that is located within 

24 the United States and owned by any entity other 

25 than an entity that would be ineligible for an award 


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

2 5323(u). 

3 ‘‘(c) 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) CREDIT TREATED AS REFUNDABLE.—In 

9 the case of any taxable year in which the taxpayer 

10 is allowed a credit under subsection (a) and is un11 able to use such credit as an offset to the regular 

12 tax liability of such taxpayer, such taxpayer may 

13 elect to have such credit treated as an overpayment 

14 and refunded to the taxpayer for such year. 

15 ‘‘(3) BASIS ADJUSTMENT.—For purposes of 

16 this subtitle, if a credit is allowed under subsection 

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

18 basis of such railcar shall be reduced by the amount 

19 of the credit so allowed. 

20 ‘‘(4) SALE-LEASEBACK.—For purposes of sub21 section (a), if any qualified freight railcar is— 

22 ‘‘(A) originally placed in service by a per23 son after the date of the enactment of this sec24 tion, and 


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

2 within 3 months after such railcar is originally 

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

4 one railcar subject to the same lease, within 3 

5 months after the date the final railcar is placed 

6 in service, so long as the period between the 

7 time the first railcar is placed in service and the 

8 time the last railcar is placed in service does 

9 not exceed 24 months), such railcar shall be 

10 treated as originally placed in service not earlier 

11 than the date on which such railcar is used 

12 under the leaseback referred to in this para13 graph. 

14 ‘‘(5) SYNDICATION.—For purposes of sub15 section (a), if— 

16 ‘‘(A) any qualified freight railcar is origi17 nally placed in service after the date of enact18 ment of this section by the lessor of such rail19 car, 

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

21 any subsequent purchaser within 3 months 

22 after the date such railcar was originally placed 

23 in service (or, in the case of more than one rail24 car subject to the same lease, within 3 months 

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1 ice and the time the last railcar is placed in 

2 service does not exceed 12 months), and 

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

4 sale during such 3-month period remains the 

5 same as when such railcar was originally placed 

6 in service, such railcars shall be treated as 

7 originally placed in service not earlier than the 

8 date of such last sale. 

9 ‘‘(6) ENTITIES OWNED OR CONTROLLED BY

10 STATE-OWNED ENTERPRISES INELIGIBLE.—No cred11 it under subsection (a) shall be allowed to any tax12 payer that would be ineligible for an award of a con13 tract or subcontract under 49 U.S.C. 5323(u). 

14 ‘‘(d) TERMINATION.—This section shall not apply to 

15 any qualifying railcar facility equipment and technology 

16 modernization amount after December 31, 2024, or to any 

17 qualifying railcar replacement and modernization amount, 

18 or any qualifying scrap amount after December 31, 

19 2025.’’. 

20 (b) CREDIT ALLOWED AS BUSINESS CREDIT.—Sec21 tion 38(b) of the Internal Revenue Code of 1986 (relating 

22 to current year business credit) is amended by striking 

23 ‘‘plus’’ at the end of paragraph (32), by striking the period 

24 at the end of paragraph (33) and inserting ‘‘, plus’’ and 


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1 by inserting at the end thereof the following new para2 graph: 

3 ‘‘(34) the freight railcar modernization credit 

4 determined under section 45U.’’. 

5 (c) COORDINATION WITH SECTION 55.—Section 

6 38(c)(4)(B) of the Internal Revenue Code of 1986 is 

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

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

9 after clause (ix) the following new clause: 

10 ‘‘(x) the freight railcar modernization 

11 credit determined under section 45U,’’. 

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

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

14 of the Internal Revenue Code of 1986 is amended by in15 serting after the item relating to section 45T the following 

16 new item: 

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

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

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

19 amounts paid or incurred, after April 30, 2021. 

20 SEC. 3. REPORT ON THE FREIGHT RAILCAR MODERNIZA21 TION CREDIT. 

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

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

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

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1 resentatives and the Committee on Finance of the Senate 

2 a report on activity with respect to the qualified freight 

3 railcar credit under section 45U of the Internal Revenue 

4 Code of 1986. 

5 (b) REPORT CONTENTS.—The report submitted 

6 under subsection (a) shall contain information with re7 spect to the following: 

8 (1) The number of times the credit was 

9 claimed. 

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

11 of the credit. 

12 (3) The number of new railcars entered into 

13 contract as a result of the credit. 

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

15 of the credit. 

16 (5) The number of facilities modified as a result 

17 of the credit. 

Æ 


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