II 

110TH CONGRESS 

1ST SESSION S. 1125 

To amend the Internal Revenue Code of 1986 to provide incentives to encourage investment in the expansion of freight rail infrastructure capacity 

and to enhance modal tax equity. 

IN THE SENATE OF THE UNITED STATES 

APRIL 17, 2007 

Mr. LOTT (for himself, Mr. CONRAD, Mr. SMITH, Mr. COCHRAN, Mr. NELSON

of Nebraska, Mr. GRAHAM, Mr. ISAKSON, Mr. STEVENS, Mr. HAGEL, Ms. 

LANDRIEU, and Mr. CRAPO) introduced the following bill; which was read 

twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

incentives to encourage investment in the expansion of 

freight rail infrastructure capacity and to enhance modal 

tax equity. 

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 Infra5 structure Capacity Expansion Act of 2007’’. 


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1 SEC. 2. CREDIT FOR FREIGHT RAIL INFRASTRUCTURE CA2 PACITY EXPANSION PROPERTY. 

3 (a) IN GENERAL.—Subpart D of part IV of sub4 chapter A of chapter 1 of the Internal Revenue Code of 

5 1986 (relating to business-related credits) is amended by 

6 adding at the end the following new section: 

7 ‘‘SEC. 45O. FREIGHT RAIL CAPACITY EXPANSION CREDIT. 

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

9 the freight rail capacity expansion credit determined under 

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

11 25 percent of the cost of the following property placed in 

12 service during the taxable year: 

13 ‘‘(1) New qualified freight rail infrastructure 

14 property. 

15 ‘‘(2) New qualified locomotive property. 

16 ‘‘(b) NEW QUALIFIED FREIGHT RAIL INFRASTRUC17 TURE PROPERTY.—For purposes of this section— 

18 ‘‘(1) IN GENERAL.—The term ‘new qualified 

19 freight rail infrastructure property’ means qualified 

20 freight rail infrastructure property— 

21 ‘‘(A) the construction or erection of which 

22 is completed by the taxpayer after the date of 

23 the enactment of this section, or 

24 ‘‘(B) which is acquired by the taxpayer 

25 after such date, but only if the original use of 

26 such property commences with the taxpayer. 


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1 ‘‘(2) EXCEPTION FOR PROPERTY REPLACING

2 PROPERTY AT EXISTING LOCATION.—The term ‘new 

3 qualified freight rail infrastructure property’ does 

4 not include property which is replacing existing 

5 property if the property is located at the site of the 

6 existing property. The preceding sentence shall not 

7 apply to the replacement or expansion of a bridge or 

8 tunnel to allow for additional clearance, track, or 

9 other capacity enhancement where such clearance, 

10 track, or other capacity enhancement did not pre11 viously exist. 

12 ‘‘(3) QUALIFIED FREIGHT RAIL INFRASTRUC13 TURE PROPERTY.— 

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

15 freight rail infrastructure property’ means 

16 property used in the movement of freight by 

17 rail— 

18 ‘‘(i) the cost of which is chargeable to 

19 capital account (determined without regard 

20 to section 179F), and 

21 ‘‘(ii) which constitutes— 

22 ‘‘(I) railroad grading or tunnel 

23 bore (as defined in section 168(e)(4)), 

24 ‘‘(II) tunnels or subways, 


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1 ‘‘(III) track, including ties, rails, 

2 ballast, or other track material, 

3 ‘‘(IV) bridges, trestles, culverts, 

4 or other elevated or submerged struc5 tures, 

6 ‘‘(V) terminals, yards, roadway 

7 buildings, fuel stations, or railroad 

8 wharves or docks, including fixtures 

9 attached thereto, and equipment used 

10 exclusively therein, 

11 ‘‘(VI) railroad signal, commu12 nication, or other operating systems, 

13 including components of such systems 

14 that must be installed on locomotives 

15 or other rolling stock, or 

16 ‘‘(VII) intermodal transfer or 

17 transload facilities or terminals, in18 cluding fixtures attached thereto, and 

19 equipment used exclusively therein. 

20 ‘‘(B) EXCLUSIONS.—The term ‘qualified 

21 freight rail infrastructure property’ shall not in22 clude— 

23 ‘‘(i) land, 

24 ‘‘(ii) rolling stock, including loco25 motives, or 


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1 ‘‘(iii) property used predominantly 

2 outside the United States, except that this 

3 subparagraph shall not apply to any prop4 erty described in section 168(g)(4). 

5 ‘‘(c) NEW QUALIFIED LOCOMOTIVE PROPERTY.— 

6 For purposes of this section— 

7 ‘‘(1) IN GENERAL.—The term ‘new qualified lo8 comotive property’ means qualified locomotive prop9 erty which is acquired by the taxpayer after the date 

10 of the enactment of this section, but only if the 

11 original use of such property commences with the 

12 taxpayer. 

13 ‘‘(2) QUALIFIED LOCOMOTIVE PROPERTY.—The 

14 term ‘qualified locomotive property’ means a loco15 motive which— 

16 ‘‘(A) is owned by, or leased to, a taxpayer 

17 which meets the capacity expansion requirement 

18 of paragraph (3) for the taxable year in which 

19 the locomotive is placed in service, and 

20 ‘‘(B) meets the Environmental Protection 

21 Agency’s emission standards for locomotives 

22 and locomotive engines (as in effect on Decem23 ber 31, 2006). 

24 ‘‘(3) CAPACITY EXPANSION REQUIREMENT.— 


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1 ‘‘(A) IN GENERAL.—A taxpayer meets the 

2 requirements of this paragraph with respect to 

3 any locomotive only if, on the last day of the 

4 taxable year in which such locomotive is placed 

5 in service, the total horsepower of all loco6 motives owned by, or leased to, the taxpayer ex7 ceeds the total horsepower of all locomotives 

8 owned by, or leased to, the taxpayer on the last 

9 day of the preceding taxable year. A determina10 tion under this paragraph shall be made pursu11 ant to such reports as the Secretary, in con12 sultation with the Surface Transportation 

13 Board, may prescribe. 

14 ‘‘(B) SPECIAL RULE FOR THE LEASING OF

15 LOCOMOTIVES.—In the case of the leasing of lo16 comotives, total horsepower under subpara17 graph (A) shall be determined with respect to 

18 all locomotives owned by, or leased to, the les19 see. 

20 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.— 

21 ‘‘(1) DEFINITIONS.—For purposes of this sec22 tion— 

23 ‘‘(A) RAILROAD SIGNAL, COMMUNICATION, 

24 OR OTHER OPERATING SYSTEM.—The term 

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1 ating system’ means an appliance, method, de2 vice, or system (including hardware and soft3 ware) which is used to operate a railroad or to 

4 improve safety or capacity of railroad oper5 ations, including a signal, an interlocker, an 

6 automatic train stop, or a train control or cab7 signal device. 

8 ‘‘(B) INTERMODAL TRANSFER OR

9 TRANSLOAD FACILITY OR TERMINAL.—The 

10 term ‘intermodal transfer or transload facility 

11 or terminal’ means a facility or terminal pri12 marily utilized in the transfer of freight be13 tween rail and any other mode of transpor14 tation. 

15 ‘‘(2) COORDINATION WITH OTHER CREDITS.— 

16 The cost of any property taken into account in de17 termining the credit under this section may not be 

18 taken into account in determining a credit under any 

19 other provision of this title. 

20 ‘‘(3) BASIS ADJUSTMENT.—If a credit is deter21 mined under this section with respect to the cost of 

22 any qualified freight rail infrastructure property or 

23 qualified locomotive property, the basis of such prop24 erty shall be reduced by the amount of the credit so 

25 determined. 


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1 ‘‘(4) SALE-LEASEBACKS.—If qualified freight 

2 rail infrastructure property or qualified locomotive 

3 property is— 

4 ‘‘(A) originally placed in service by a per5 son after the date of enactment of this section, 

6 and 

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

8 within 3 months after the property is originally 

9 placed in service (or, in the case of multiple 

10 units of property subject to the same lease, 

11 within 3 months after the date the final unit is 

12 placed in service, so long as the period between 

13 the time the first unit is placed in service and 

14 the time the last unit is placed in service does 

15 not exceed 12 months), 

16 such property shall be treated as originally placed in 

17 service not earlier than the date on which such prop18 erty is used under the lease referred to in subpara19 graph (B). 

20 ‘‘(5) RECAPTURE.—The benefit of any credit 

21 allowable under subsection (a) shall, under regula22 tions prescribed by the Secretary, be recaptured with 

23 respect to any new qualified locomotive property that 

24 is sold or otherwise disposed of by the taxpayer dur25 ing the 5-year period beginning on the date on which 


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1 such property is originally placed in service. The 

2 preceding sentence shall not apply to property that 

3 is sold by and subsequently leased back to the tax4 payer under paragraph (4). 

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

6 any property placed in service after December 31, 2012.’’. 

7 (b) CREDIT ALLOWED AS BUSINESS CREDIT.—Sec8 tion 38(b) of the Internal Revenue Code of 1986 (relating 

9 to current year business credit) is amended by striking 

10 ‘‘plus’’ at the end of paragraph (30), by striking the period 

11 at the end of paragraph (31) and inserting ‘‘, plus’’, and 

12 by adding at the end the following new paragraph: 

13 ‘‘(32) the freight rail capacity expansion credit 

14 determined under section 45O.’’. 

15 (c) COORDINATION WITH SECTION 55.—Section 

16 38(c)(4)(B) of the Internal Revenue Code of 1986 is 

17 amended by striking ‘‘and’’ at the end of clause (i), by 

18 striking the period at the end of clause (ii)(II) and insert19 ing ‘‘, and’’, and by adding at the end the following new 

20 clause: 

21 ‘‘(iii) for taxable years beginning after 

22 the date of the enactment of this clause, 

23 the credit determined under section 45O.’’. 

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

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


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1 of the Internal Revenue Code of 1986 is amended by in2 serting after the item relating to section 45N the following 

3 new item: 

‘‘Sec. 45O. Freight rail capacity expansion credit.’’. 

4 SEC. 3. EXPENSING OF FREIGHT RAIL INFRASTRUCTURE 

5 PROPERTY. 

6 (a) IN GENERAL.—Part VI of subchapter B of chap7 ter 1 of the Internal Revenue Code of 1986 (relating to 

8 itemized deductions for individuals and corporations) is 

9 amended by inserting after section 179E the following new 

10 section: 

11 ‘‘SEC. 179F. ELECTION TO EXPENSE QUALIFIED FREIGHT 

12 RAIL INFRASTRUCTURE PROPERTY. 

13 ‘‘(a) ALLOWANCE OF DEDUCTION.— 

14 ‘‘(1) IN GENERAL.—A taxpayer may elect to 

15 treat any amount paid or incurred for the acquisi16 tion, construction, or erection of qualified freight rail 

17 infrastructure property (as defined in section 

18 45O(b)(3)) as an amount not chargeable to capital 

19 account. Any amount so treated shall be allowed as 

20 a deduction for the taxable year in which such prop21 erty was placed in service. 

22 ‘‘(2) COORDINATION WITH CREDIT.—The 

23 amount to which the election under paragraph (1) 

24 applies with respect to any property shall be reduced 


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1 by an amount equal to the amount of any reduction 

2 in the basis of the property under section 45O(d)(3). 

3 ‘‘(b) ELECTION.—An election under subsection (a) 

4 shall be made, with respect to each class of property for 

5 each taxable year, at such time and in such manner as 

6 the Secretary may prescribe by regulation. If a taxpayer 

7 makes such an election with respect to any class of prop8 erty for any taxable year, the election shall apply to all 

9 qualified freight rail infrastructure property in such class 

10 placed in service during such taxable year. An election 

11 under this section shall not affect the character of any 

12 property for the purposes of section 45O. 

13 ‘‘(c) DEDUCTION ALLOWED IN COMPUTING MINIMUM

14 TAX.—For purposes of determining alternative minimum 

15 taxable income under section 55, the deduction under sub16 section (a) for qualified freight rail infrastructure property 

17 shall be determined under this section without regard to 

18 any adjustment under section 56. 

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

20 any property placed in service after December 31, 2012.’’. 

21 (b) DEDUCTION FOR CAPITAL EXPENDITURES.— 

22 Section 263(a)(1) of the Internal Revenue Code of 1986 

23 (relating to capital expenditures) is amended by striking 

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1 riod at the end of subparagraph (L) and inserting ‘‘, or’’ 

2 and by adding at the end the following new subparagraph: 

3 ‘‘(M) expenditures for which a deduction is 

4 allowed under section 179F.’’. 

5 (c) TECHNICAL AND CLERICAL AMENDMENTS.— 

6 (1) Section 312(k)(3)(B) of the Internal Rev7 enue Code of 1986 is amended by striking ‘‘or 

8 179E’’ each place it appears in the text or heading 

9 thereof and inserting ‘‘179E, or 179F’’. 

10 (2) Paragraphs (2)(C) and (3)(C) of section 

11 1245(a) of such Code are each amended by inserting 

12 ‘‘179F,’’ after ‘‘179E,’’. 

13 (3) The table of sections for part VI of sub14 chapter B of chapter 1 of such Code is amended by 

15 inserting after the item relating to section 179E the 

16 following new item: 

‘‘Sec. 179F. Election to expense qualified freight rail infrastructure property.’’. 

17 SEC. 4. EFFECTIVE DATE. 

18 The amendments made by sections 2 and 3 shall 

19 apply to property placed in service after December 31, 

20 2007. 

Æ 


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