Freight RAILCAR Act of 2020

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the Internal Revenue Code of 1986 to provide a tax credit to encourage the replacement or modernization of inefficient, outdated freight railcars, and for other purposes. 1.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 2020 Freight RAILCAR Act of 2020 2. Qualified freight railcar credit (a) In general Subpart D of part IV of subchapter A of chapter 1 45U. Qualified freight railcar credit (a) General rule For purposes of section 38, the qualified freight railcar credit determined under this section for the taxable year is an amount equal to 50 percent of the sum of— (1) the qualifying replacement or modernization amount, (2) the qualifying scrap amount, and (3) the qualifying railcar facility and technology modernization amount. (b) Definitions In this section— (1) Qualifying replacement or modernization amount The term qualifying replacement or modernization amount (A) the basis of any newly built qualified freight railcar placed in service by the taxpayer during the taxable year, plus (B) the qualified freight railcar modernization expenditures of the taxpayer for the taxable year. (2) Qualifying scrap amount The term qualifying scrap amount (A) the depreciated value of a qualified freight railcar, as such value is defined and calculated in accordance with the Association of American Railroads Interchange Rules, less (B) the sum of scrap and part out net proceeds received by the taxpayer for such qualified freight railcar. (3) Qualifying railcar facility and technology modernization amount The term qualifying railcar facility equipment and technology modernization amount (A) for re-equipping and enhancing the infrastructure of an existing qualified facility for the manufacture, repair, or modernization of railcars, which— (i) enables such facility, after such improvements, to modernize railcars such that they will meet the requirements of the Association of American Railroads Standard S–286 or the design standards set forth in the Pipeline and Hazardous Materials Safety Administration’s HM–251 final rule (as amended by HM–251C), or (ii) 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 (B) is associated with the deployment of technology, including equipment, used by any owner of a qualified freight railcar or an existing qualified facility to manufacture, repair, or modernize railcars or to manufacture railcar components that improves the efficiency, quality, or safety of railcar or railcar component manufacturing, repair, modernization or fleet management operations. (4) Newly built replacement railcar The term newly built replacement railcar (A) is built after the date of the enactment of this section, and (B) is ordered or originally placed in service before January 1, 2025. (5) Originates The term originates 19 U.S.C. 4531(c) (6) Qualified railway supply company The term qualified railway supply company 49 U.S.C. 5323(u) (7) 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) 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 has been previously claimed by any taxpayer. (B) Significant improvement requirements (i) In general A freight railcar shall be treated as meeting significant improvement requirements for capacity, fuel efficiency, or performance if— (I) in the case of a newly built replacement railcar, the taxpayer certifies— (aa) such railcar is owned by the taxpayer, and (bb) that— (AA) such railcar replaces two freight railcars owned by the taxpayer that were in service within the 48 months preceding the taxable year, and (BB) such freight railcars were scrapped and permanently removed from the AAR Umler System master file during the taxable year, and (II) in the case of a freight railcar that is modernized, the taxpayer certifies that the modernization has resulted in a significant improvement in capacity, fuel efficiency or performance. (ii) Significant improvement For purposes of this paragraph, an improvement in capacity or fuel efficiency and performance with respect to a modernized freight railcar shall be treated as 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 (8) Qualified freight railcar modernization expenditure The term qualified freight railcar significant improvement 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. (9) Qualified facility The term qualified facility 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)(1) and is unable to utilize such credit as an offset to their regular tax liability, the 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)(1) 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)(1), 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 the railcars are 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)(1), 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, 2023, or to any qualifying replacement or modernization amount, or any qualifying scrap amount after December 31, 2024. . (b) Credit allowed as business credit Section 38(b) plus , plus (34) the qualified freight railcar credit determined under section 45U. . (c) Coordination with section 55 Section 38(c)(4)(B) (x) the qualified freight railcar credit determined under section 45U, . (d) Clerical amendment The table of sections for subpart D of part IV of subchapter A of chapter 1 Sec. 45U. Qualified freight railcar 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, 2020. 3. Report on the qualified freight railcar 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 36D (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.

Summary: Freight Rail Assistance and Investment to Launch Coronavirus-era Activity and Recovery Act of 2020 or the Freight RAILCAR Act of 2020 This bill establishes a new tax credit for the replacement and modernization of qualified freight railcars. Specifically, it allows a credit for 50% of the sum of the qualifying replacement or modernization amount, the qualifying scrap amount, and the qualifying railcar facility and technology modernization amount. The bill defines qualified freight railcar as a freight railcar that meets significant improvement requirements for capacity, fuel efficiency, or performance.