Freight RAILCAR Act of 2023

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the Internal Revenue Code of 1986 to provide a tax credit to encourage the replacement or modernization of inefficient, outdated freight railcars, and for other purposes. 1. Short title This Act may be cited as the Freight Rail Assistance and Investment to Launch Coronavirus-era Activity and Recovery Act of 2023 Freight RAILCAR Act of 2023 2. Freight railcar modernization credit (a) In general Subpart D of part IV of subchapter A of chapter 1 45BB. Freight railcar modernization credit (a) In general For purposes of section 38, the freight railcar modernization credit determined under this section for the taxable year is an amount equal to 10 percent of the taxpayer’s freight railcar fleet modernization expenses. (b) Limitation No more than 2,000 qualified freight railcars per taxpayer may be taken into account for purposes of determining the credit under subsection (a) with respect to a taxable year. (c) Definitions For purposes of this section— (1) Freight railcar fleet modernization expenses The term freight railcar fleet modernization expenses (2) Qualifying railcar replacement and modernization amount The term qualifying railcar replacement and modernization amount (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) Qualified newly built replacement railcar The term qualified newly built replacement railcar (A) is built after the date of the enactment of this section, (B) is ordered or originally placed in service before the date that is three years after the date of the enactment of this section, 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. (4) Qualified freight railcar (A) In general The term qualified freight railcar (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) 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 (5) Qualified railcar modernization expenditure The term qualified railcar modernization expenditure (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. (6) Qualified facility The term qualified facility 49 U.S.C. 5323(u) (d) 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) 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. (3) 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. (4) 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. (5) 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) (e) Termination This section shall not apply to any qualifying railcar replacement and modernization amount after the date that is three years after the date of the enactment of this section. . (b) Credit allowed as business credit Section 38(b) plus , plus (42) the freight railcar modernization credit determined under section 45BB. . (c) Coordination with section 55 Section 38(c)(4)(B) (x) the freight railcar modernization credit determined under section 45BB, . (d) Clerical amendment The table of sections for subpart D of part IV of subchapter A of chapter 1 Sec. 45BB. 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 December 31, 2022. 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 45BB (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.

Summary: Freight Rail Assistance and Investment to Launch Coronavirus-Era Activity and Recovery Act of 2023 or the Freight RAILCAR Act of 2023 This bill provides a new tax credit through 2025 for 10% of freight railcar fleet modernization expenses (i.e., railcar replacement and modernization expenses for meeting fuel efficiency and performance standards). The bill provides that no more than 2,000 freight railcars per taxpayer may be taken into account for purposes of determining the credit in a taxable year. The Department of the Treasury must report to Congress on the credit to provide information on the number of times the credit was claimed and the number of railcars scrapped or built as a result of the credit.