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encourage the replacement or modernization of inefficient, outdated 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. BLU-
MENAUER, Ms. BONAMICI, Mr. CRAWFORD, Mr. RODNEY DAVIS of Illi-
nois, 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 moderniza-
tion of inefficient, outdated freight railcars, and for other 
purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Freight Rail Assist-
ance and Investment to Launch Coronavirus-era Activity 
and Recovery Act of 2021’’ or the ‘‘Freight RAILCAR 
Act of 2021’’. 
VerDate Sep 11 2014 
17:39 Jun 11, 2021
Jkt 019200
PO 00000
Frm 00001
Fmt 6652
Sfmt 6201
E:\BILLS\H2289.IH
H2289
pamtmann on DSKBC07HB2PROD with BILLS
SEC. 2. FREIGHT RAILCAR MODERNIZATION CREDIT. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
section: 
‘‘SEC. 45U. FREIGHT RAILCAR MODERNIZATION CREDIT. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
the freight railcar modernization credit determined under 
this section for the taxable year is an amount equal to 
50 percent of the taxpayer’s freight railcar fleet mod-
ernization expenses. 
‘‘(b) DEFINITIONS.—For purposes of this section— 
‘‘(1) FREIGHT RAILCAR FLEET MODERNIZATION 
EXPENSES.—The term ‘freight railcar fleet mod-
ernization expenses’ means the sum of— 
‘‘(A) the qualifying railcar replacement 
and modernization amount, 
‘‘(B) the qualifying scrap amount, and 
‘‘(C) the qualifying railcar facility and 
technology modernization amount. 
‘‘(2) QUALIFYING RAILCAR REPLACEMENT AND 
MODERNIZATION
AMOUNT.—The term ‘qualifying 
railcar replacement and modernization amount’ 
means— 
VerDate Sep 11 2014 
17:39 Jun 11, 2021
Jkt 019200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6201
E:\BILLS\H2289.IH
H2289
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(A) the basis of any qualified newly built 
replacement railcar placed in service by the tax-
payer during the taxable year, plus 
‘‘(B) the qualified railcar modernization 
expenditures of the taxpayer for the taxable 
year. 
‘‘(3) QUALIFYING SCRAP AMOUNT.—The term 
‘qualifying scrap amount’ means— 
‘‘(A) the depreciated value or salvage 
value, as applicable, of a qualified freight rail-
car (as such value is defined and calculated in 
accordance with the Association of American 
Railroads Interchange Rules) which is scrapped 
by the taxpayer and permanently removed from 
the AAR Umler System master file during the 
taxable year, less 
‘‘(B) the sum of scrap and part out net 
proceeds received by the taxpayer for such 
qualified freight railcar. For purposes of this 
subparagraph, scrap proceeds shall be cal-
culated by using the Association of American 
Railroads Office Manual per pound credits for 
steel, stainless steel, and aluminum (as applica-
ble) in effect on the date railcar is scrapped. 
VerDate Sep 11 2014 
17:39 Jun 11, 2021
Jkt 019200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6201
E:\BILLS\H2289.IH
H2289
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(4) QUALIFYING
RAILCAR
FACILITY
AND 
TECHNOLOGY MODERNIZATION AMOUNT.—The term 
‘qualifying railcar facility equipment and technology 
modernization amount’ means amounts paid or in-
curred by the taxpayer for any railcar facility and 
technology modernization property placed in service 
during the taxable year. 
‘‘(A) RAILCAR FACILITY AND TECHNOLOGY 
MODERNIZATION PROPERTY.—The term ‘railcar 
facility and technology modernization property’ 
means property— 
‘‘(i) chargeable to capital account, 
‘‘(ii) placed in service by a qualified 
railway supply company, 
‘‘(iii) the original use of which com-
mences with the taxpayer, 
‘‘(iv) which is used to modernize an 
existing qualified facility or existing rail-
cars, and 
‘‘(v) is used for modernization pur-
poses. 
‘‘(B) 
MODERNIZATION
OF
EXISTING 
QUALIFIED
FACILITIES
OR
EXISTING
RAIL-
CARS.—Property is used to modernize an exist-
VerDate Sep 11 2014 
17:39 Jun 11, 2021
Jkt 019200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6201
E:\BILLS\H2289.IH
H2289
pamtmann on DSKBC07HB2PROD with BILLS
ing qualified facility or an existing railcar if 
such property— 
‘‘(i) 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 cor-
responding State/local requirements, or 
‘‘(ii) is associated with the deployment 
of technological equipment used by any 
owner of a freight railcar, or of an existing 
qualified facility, to manufacture, repair, 
or modernize railcars, or manufacture rail-
car components that improve the effi-
ciency, quality, or safety of— 
‘‘(I) 
fleet 
management 
oper-
ations, or 
‘‘(II) railcar or railcar component 
manufacturing, repair, or moderniza-
tion operations conducted pursuant to 
activity code certifications under the 
Association of American Railroads 
Manual 
of 
Standards 
and 
Rec-
ommended Practice, Section C, Part 
III, 
Appendix 
B 
(Specification 
VerDate Sep 11 2014 
17:39 Jun 11, 2021
Jkt 019200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6201
E:\BILLS\H2289.IH
H2289
pamtmann on DSKBC07HB2PROD with BILLS
M1002) or Association of American 
Railroads Manual of Standards and 
Recommended Practice, Section J, 
Quality Assurance (Specification M– 
1003). 
‘‘(C) 
MODERNIZATION
PURPOSES.—For 
purposes of this paragraph, the following types 
of property shall be considered as used for mod-
ernization purposes— 
‘‘(i) testing and reliability equipment 
that facilitates the development of safer 
railcars and railcar components by AAR 
certified manufacturers, including acceler-
ated life-cycle testing equipment, 
‘‘(ii) innovative technological equip-
ment that generates data relating to the 
operating conditions of rolling stock and 
communicates such data in an efficient 
manner, with the goal of improving railcar 
fleet safety, including smart technology on 
cars to monitor conditions such as leaks, 
equipment damage, or high acceleration 
events, 
‘‘(iii) remote controlled technological 
equipment that allows for inspections, 
VerDate Sep 11 2014 
17:39 Jun 11, 2021
Jkt 019200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6201
E:\BILLS\H2289.IH
H2289
pamtmann on DSKBC07HB2PROD with BILLS
cleaning or repairs to railcars to be con-
ducted remotely, 
‘‘(iv) equipment which increases the 
efficiency or capacity of, and enhances en-
vironmental controls related to facilities 
which conduct AAR certified blasting, 
cleaning, coating, and painting railcar ac-
tivities, 
‘‘(v) regenerative thermal oxidizers of 
volatile organic compounds or hazardous 
air pollutants, and 
‘‘(vi) innovative technological equip-
ment or software that will enhance the effi-
ciency of a railcar owner’s fleet manage-
ment systems, including programs that 
map timing and routing of railcars to re-
pair shops or storage facilities that im-
prove efficiency of rail transportation. 
‘‘(5) QUALIFIED NEWLY BUILT REPLACEMENT 
RAILCAR.—The term ‘qualified newly built replace-
ment railcar’ means a qualified freight railcar 
which— 
‘‘(A) is built after the date of the enact-
ment of this section, 
VerDate Sep 11 2014 
17:39 Jun 11, 2021
Jkt 019200
PO 00000
Frm 00007
Fmt 6652
Sfmt 6201
E:\BILLS\H2289.IH
H2289
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(B) is ordered or originally placed in serv-
ice before January 1, 2025, and 
‘‘(C) replaces two freight railcars owned by 
the taxpayer that— 
‘‘(i) were in service within the 48 
months preceding the beginning of the tax-
able year, and 
‘‘(ii) which were both scrapped and 
permanently removed from the AAR Umler 
System master file during such taxable 
year. 
‘‘(6) ORIGINATES.—The term ‘originates’ refers 
to the country of origin of a part, component, sub-
assembly or finished product, as described in the 
Rules of Origin of Article 4.2 of the United States– 
Mexico–Canada Agreement (19 U.S.C. 4531(c)) or 
any subsequent free trade agreement between the 
United States, Mexico, and Canada. 
‘‘(7) QUALIFIED RAILWAY SUPPLY COMPANY.— 
The term ‘qualified railway supply company’ means 
an entity that manufactures, repairs, modernizes or 
owns freight railcars or manufactures components 
for freight railcars, that is not an entity that would 
be ineligible for an award of a contract or sub-
contract under 49 U.S.C. 5323(u). 
VerDate Sep 11 2014 
17:39 Jun 11, 2021
Jkt 019200
PO 00000
Frm 00008
Fmt 6652
Sfmt 6201
E:\BILLS\H2289.IH
H2289
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(8) QUALIFIED FREIGHT RAILCAR.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
freight railcar’ means a freight railcar that— 
‘‘(i) is either acquired or modernized 
by the taxpayer after the date of the enact-
ment of this section, 
‘‘(ii) meets the significant improve-
ment requirements for capacity, fuel effi-
ciency, or performance of subparagraph 
(B), 
‘‘(iii) originates from a qualified rail-
way supply company and 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 sig-
nificant improvement if— 
‘‘(i) such capacity or fuel efficiency, as 
the case may be, is increased by at least 8 
percent, or 
VerDate Sep 11 2014 
17:39 Jun 11, 2021
Jkt 019200
PO 00000
Frm 00009
Fmt 6652
Sfmt 6201
E:\BILLS\H2289.IH
H2289
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(ii) in the case of performance, the 
qualified freight railcar meets the require-
ments of the Association of American Rail-
roads Standard S–286 or is modernized to 
meet the design standards set forth in final 
rule HM–251 of the Pipeline and Haz-
ardous Materials Safety Administration (as 
amended by HM–251C). 
‘‘(C) MODERNIZED.—The term ‘modern-
ized’ means modified, retrofitted, converted or 
rebuilt for the purpose of meeting the signifi-
cant improvement criteria of subparagraph (B). 
‘‘(9) QUALIFIED RAILCAR MODERNIZATION EX-
PENDITURE.—The term ‘qualified railcar moderniza-
tion expenditure’ means any amount paid or in-
curred— 
‘‘(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 cap-
ital account with respect to such freight railcar. 
‘‘(10) QUALIFIED FACILITY.—The term ‘quali-
fied facility’ means a facility that is located within 
the United States and owned by any entity other 
than an entity that would be ineligible for an award 
VerDate Sep 11 2014 
17:39 Jun 11, 2021
Jkt 019200
PO 00000
Frm 00010
Fmt 6652
Sfmt 6201
E:\BILLS\H2289.IH
H2289
pamtmann on DSKBC07HB2PROD with BILLS
of a contract or subcontract under 49 U.S.C. 
5323(u). 
‘‘(c) SPECIAL RULES.— 
‘‘(1) DENIAL OF DOUBLE BENEFIT.—No credit 
shall be allowed under subsection (a) for any ex-
pense 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) and is un-
able to use such credit as an offset to the regular 
tax liability of such taxpayer, such 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) 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 sub-
section (a), if any qualified freight railcar is— 
‘‘(A) originally placed in service by a per-
son after the date of the enactment of this sec-
tion, and 
VerDate Sep 11 2014 
17:39 Jun 11, 2021
Jkt 019200
PO 00000
Frm 00011
Fmt 6652
Sfmt 6201
E:\BILLS\H2289.IH
H2289
pamtmann on DSKBC07HB2PROD with BILLS
ice 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 cred-
it under subsection (a) shall be allowed to any tax-
payer that would be ineligible for an award of a con-
tract 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, 2024, or to any 
qualifying railcar replacement and modernization amount, 
or any qualifying scrap amount after December 31, 
2025.’’. 
(b) CREDIT ALLOWED AS BUSINESS CREDIT.—Sec-
tion 38(b) of the Internal Revenue Code of 1986 (relating 
to current year business credit) is amended by striking 
‘‘plus’’ at the end of paragraph (32), by striking the period 
at the end of paragraph (33) and inserting ‘‘, plus’’ and 
VerDate Sep 11 2014 
17:39 Jun 11, 2021
Jkt 019200
PO 00000
Frm 00013
Fmt 6652
Sfmt 6201
E:\BILLS\H2289.IH
H2289
pamtmann on DSKBC07HB2PROD with BILLS
by inserting at the end thereof the following new para-
graph: 
‘‘(34) the freight railcar modernization credit 
determined under section 45U.’’. 
(c) COORDINATION
WITH
SECTION
55.—Section 
38(c)(4)(B) of the Internal Revenue Code of 1986 is 
amended by redesignating clauses (x), (xi), and (xii) as 
clauses (xi), (xii), and (xiii) respectively, and by inserting 
after clause (ix) the following new clause: 
‘‘(x) the freight railcar modernization 
credit determined under section 45U,’’. 
(d) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by in-
serting after the item relating to section 45T the following 
new item: 
‘‘Sec. 45U. 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 April 30, 2021. 
SEC. 3. REPORT ON THE FREIGHT RAILCAR MODERNIZA-
TION 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 Rep-
VerDate Sep 11 2014 
17:39 Jun 11, 2021
Jkt 019200
PO 00000
Frm 00014
Fmt 6652
Sfmt 6201
E:\BILLS\H2289.IH
H2289
pamtmann on DSKBC07HB2PROD with BILLS
resentatives and the Committee on Finance of the Senate 
a report on activity with respect to the qualified freight 
railcar credit under section 45U of the Internal Revenue 
Code of 1986. 
(b) REPORT
CONTENTS.—The report submitted 
under subsection (a) shall contain information with re-
spect 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. 
Æ 
VerDate Sep 11 2014 
17:39 Jun 11, 2021
Jkt 019200
PO 00000
Frm 00015
Fmt 6652
Sfmt 6301
E:\BILLS\H2289.IH
H2289
pamtmann on DSKBC07HB2PROD with BILLS