120 
deem bonds of the issue within 90 
days after the end of the 4-year pe-
riod 
beginning 
on 
the 
date 
of 
issuance. 
‘‘(g) RECAPTURE OF PORTION OF CREDIT WHERE 
CESSATION OF COMPLIANCE.— 
‘‘(1) IN GENERAL.—If any bond which when 
issued purported to be a qualified high-speed rail in-
frastructure bond ceases to be such a qualified bond, 
the issuer shall pay to the United States (at the 
time required by the Secretary) an amount equal to 
the sum of— 
‘‘(A) the aggregate of the credits allowable 
under this section with respect to such bond 
(determined without regard to subsection (c)) 
for taxable years ending during the calendar 
year in which such cessation occurs and the 2 
preceding calendar years, and 
‘‘(B) interest at the underpayment rate 
under section 6621 on the amount determined 
under subparagraph (A) for each calendar year 
for the period beginning on the first day of 
such calendar year. 
‘‘(2) FAILURE TO PAY.—If the issuer fails to 
timely pay the amount required by paragraph (1) 
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with respect to such bond, the tax imposed by this 
chapter on each holder of any such bond which is 
part of such issue shall be increased (for the taxable 
year of the holder in which such cessation occurs) by 
the aggregate decrease in the credits allowed under 
this section to such holder for taxable years begin-
ning in such 3 calendar years which would have re-
sulted solely from denying any credit under this sec-
tion with respect to such issue for such taxable 
years. 
‘‘(3) SPECIAL RULES.— 
‘‘(A) TAX
BENEFIT
RULE.—The tax for 
the taxable year shall be increased under para-
graph (2) only with respect to credits allowed 
by reason of this section which were used to re-
duce tax liability. In the case of credits not so 
used to reduce tax liability, the carryforwards 
under subsection (c) shall be appropriately ad-
justed. 
‘‘(B) NO CREDITS AGAINST TAX.—Any in-
crease in tax under paragraph (2) shall not be 
treated as a tax imposed by this chapter for 
purposes of determining— 
‘‘(i) the amount of any credit allow-
able under this part, or 
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‘‘(ii) the amount of the tax imposed 
by section 55. 
‘‘(h) OTHER DEFINITIONS AND SPECIAL RULES.— 
For purposes of this section— 
‘‘(1) BOND.—The term ‘bond’ includes any ob-
ligation. 
‘‘(2) QUALIFIED PROJECT.—The term ‘qualified 
project’ means any project described in section 
26106(a)(2) of title 49, United States Code. 
‘‘(3) TREATMENT OF CHANGES IN USE.—For 
purposes of subsection (e)(2), the proceeds from the 
sale of an issue shall not be treated as used for a 
qualified project to the extent that the issuer takes 
any action within its control which causes such pro-
ceeds not to be used for a qualified project. The Sec-
retary shall prescribe regulations specifying remedial 
actions that may be taken (including conditions to 
taking such remedial actions) to prevent an action 
described in the preceding sentence from causing a 
bond to fail to be a qualified high-speed rail infra-
structure bond. 
‘‘(4) PARTNERSHIP; 
S
CORPORATION; 
AND 
OTHER
PASS-THRU
ENTITIES.—Under regulations 
prescribed by the Secretary, in the case of a partner-
ship, trust, S corporation, or other pass-thru entity, 
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rules similar to the rules of section 41(g) shall apply 
with respect to the credit allowable under subsection 
(a). 
‘‘(5) BONDS
HELD
BY
REGULATED
INVEST-
MENT COMPANIES.—If any qualified high-speed rail 
infrastructure bond is held by a regulated invest-
ment company, the credit determined under sub-
section (a) shall be allowed to shareholders of such 
company under procedures prescribed by the Sec-
retary. 
‘‘(6) REPORTING.—Issuers of qualified high- 
speed rail infrastructure bonds shall submit reports 
similar to the reports required under section 
149(e).’’. 
(b) AMENDMENTS TO OTHER CODE SECTIONS.— 
(1) REPORTING.—Subsection (d) of section 
6049 of the Internal Revenue Code of 1986 (relating 
to returns regarding payments of interest) is amend-
ed by adding at the end the following new para-
graph: 
‘‘(8) REPORTING
OF
CREDIT
ON
QUALIFIED 
HIGH-SPEED RAIL INFRASTRUCTURE BONDS.— 
‘‘(A) IN GENERAL.—For purposes of sub-
section (a), the term ‘interest’ includes amounts 
includible in gross income under section 54(d) 
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and such amounts shall be treated as paid on 
the credit allowance date (as defined in section 
54(b)(4)). 
‘‘(B) 
REPORTING
TO
CORPORATIONS, 
ETC.—Except as otherwise provided in regula-
tions, in the case of any interest described in 
subparagraph (A), subsection (b)(4) shall be 
applied without regard to subparagraphs (A), 
(H), (I), (J), (K), and (L)(i) of such subsection. 
‘‘(C) REGULATORY AUTHORITY.—The Sec-
retary may prescribe such regulations as are 
necessary or appropriate to carry out the pur-
poses of this paragraph, including regulations 
which require more frequent or more detailed 
reporting.’’. 
(2) TREATMENT
FOR
ESTIMATED
TAX
PUR-
POSES.— 
(A) INDIVIDUAL.—Section 6654 of such 
Code (relating to failure by individual to pay es-
timated income tax) is amended by redesig-
nating subsection (m) as subsection (n) and by 
inserting after subsection (l) the following new 
subsection: 
‘‘(m) SPECIAL RULE FOR HOLDERS OF QUALIFIED 
HIGH-SPEED RAIL INFRASTRUCTURE BONDS.—For pur-
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poses of this section, the credit allowed by section 54 to 
a taxpayer by reason of holding a qualified high-speed rail 
infrastructure bond on a credit allowance date shall be 
treated as if it were a payment of estimated tax made by 
the taxpayer on such date.’’. 
(B) CORPORATE.—Section 6655 of such 
Code (relating to failure by corporation to pay 
estimated income tax) is amended by adding at 
the end of subsection (g) the following new 
paragraph: 
‘‘(5) SPECIAL RULE FOR HOLDERS OF QUALI-
FIED HIGH-SPEED RAIL INFRASTRUCTURE BONDS.— 
For purposes of this section, the credit allowed by 
section 54 to a taxpayer by reason of holding a 
qualified high-speed rail infrastructure bond on a 
credit allowance date shall be treated as if it were 
a payment of estimated tax made by the taxpayer on 
such date.’’. 
(c) CLERICAL AMENDMENTS.— 
(1) The table of subparts for part IV of sub-
chapter A of chapter 1 is amended by adding at the 
end the following new item: 
‘‘SUBPART H. NONREFUNDABLE CREDIT FOR HOLDERS OF QUALIFIED HIGH- 
SPEED RAIL INFRASTRUCTURE BONDS’’. 
(2) Section 6401(b)(1) is amended by striking 
‘‘and G’’ and inserting ‘‘G, and H’’. 
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(d) ISSUANCE OF REGULATIONS.—Not later than 6 
months after the date of the enactment of this section, 
the Secretary of the Treasury shall issue regulations for 
carrying out this section and the amendments made by 
this section. 
(e) HIGH-SPEED INTERCITY RAIL FACILITIES.— 
(1) REQUIREMENT
TO
MEET
TITLE
RE-
QUIREMENTS.—Section 142(i) of the Internal Rev-
enue Code of 1986 is amended by adding at the end 
the following new paragraph: 
‘‘(4) ADDITIONAL
REQUIREMENTS.—A bond 
issued as part of an issue described in subsection 
(a)(11) shall not be considered an exempt facility 
bond unless the requirements of paragraphs (1) 
through (6) of section 26106(a) of title 49, United 
States Code, are met.’’. 
(2) REVISION OF SPEED REQUIREMENT.—Sec-
tion 142(i)(1) of such Code is amended by striking 
‘‘150 miles per hour’’ and inserting ‘‘110 miles per 
hour’’. 
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to obligations issued after the date 
of the enactment of this Act. 
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Subtitle D—Energy Supply and 
Freight Rail 
SEC. 531. SHORT TITLE. 
This subtitle may be cited as the ‘‘Railroad Track 
Modernization Act of 2006’’. 
SEC. 532. CAPITAL GRANTS FOR RAILROAD TRACK. 
(a) AMENDMENT.—Chapter 223 of title 49, United 
States Code, is amended to read as follows: 
‘‘CHAPTER 223—CAPITAL GRANTS FOR 
RAILROAD TRACK 
‘‘Sec. 
‘‘22301. Capital grants for railroad track. 
‘‘§ 22301. Capital grants for railroad track 
‘‘(a) ESTABLISHMENT OF PROGRAM.— 
‘‘(1) 
ESTABLISHMENT.—The 
Secretary 
of 
Transportation shall establish a program of capital 
grants for the rehabilitation, preservation, or im-
provement of railroad track (including roadbed, 
bridges, and related track structures) of class II and 
class III railroads. Such grants shall be for rehabili-
tating, preserving, or improving track used primarily 
for freight transportation to a standard ensuring 
that the track can be operated safely and efficiently, 
including grants for rehabilitating, preserving, or im-
proving track to handle 286,000 pound rail cars. 
Grants may be provided under this chapter— 
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‘‘(A) directly to the class II or class III 
railroad; or 
‘‘(B) with the concurrence of the class II 
or class III railroad, to a State or local govern-
ment. 
‘‘(2) STATE COOPERATION.—Class II and class 
III railroad applicants for a grant under this chap-
ter are encouraged to utilize the expertise and assist-
ance of State transportation agencies in applying for 
and administering such grants. State transportation 
agencies are encouraged to provide such expertise 
and assistance to such railroads. 
‘‘(3) INTERIM REGULATIONS.—Not later than 
December 31, 2006, the Secretary shall issue tem-
porary regulations to implement the program under 
this section. Subchapter II of chapter 5 of title 5 
does not apply to a temporary regulation issued 
under this paragraph or to an amendment to such 
a temporary regulation. 
‘‘(4) FINAL REGULATIONS.—Not later than Oc-
tober 1, 2007, the Secretary shall issue final regula-
tions to implement the program under this section. 
‘‘(b) MAXIMUM FEDERAL SHARE.—The maximum 
Federal share for carrying out a project under this section 
shall be 80 percent of the project cost. The non-Federal 
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share may be provided by any non-Federal source in cash, 
equipment, or supplies. Other in-kind contributions may 
be approved by the Secretary on a case by case basis con-
sistent with this chapter. 
‘‘(c) PROJECT ELIGIBILITY.—For a project to be eli-
gible for assistance under this section the track must have 
been operated or owned by a class II or class III railroad 
as of the date of the enactment of the Railroad Track 
Modernization Act of 2006. 
‘‘(d) USE OF FUNDS.—Grants provided under this 
section shall be used to implement track capital projects 
as soon as possible. In no event shall grant funds be con-
tractually obligated for a project later than the end of the 
third Federal fiscal year following the year in which the 
grant was awarded. Any funds not so obligated by the end 
of such fiscal year shall be returned to the Secretary for 
reallocation. 
‘‘(e) ADDITIONAL PURPOSE.—In addition to making 
grants for projects as provided in subsection (a), the Sec-
retary may also make grants to supplement direct loans 
or loan guarantees made under title V of the Railroad Re-
vitalization and Regulatory Reform Act of 1976 (45 
U.S.C. 822(d)), for projects described in the last sentence 
of section 502(d) of such title. Grants made under this 
subsection may be used, in whole or in part, for paying 
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credit risk premiums, lowering rates of interest, or pro-
viding for a holiday on principal payments. 
‘‘(f) EMPLOYEE PROTECTION.—The Secretary shall 
require as a condition of any grant made under this sec-
tion that the recipient railroad provide a fair arrangement 
at least as protective of the interests of employees who 
are affected by the project to be funded with the grant 
as the terms imposed under section 11326(a), as in effect 
on the date of the enactment of the Railroad Track Mod-
ernization Act of 2006. 
‘‘(g) LABOR STANDARDS.— 
‘‘(1) PREVAILING WAGES.—The Secretary shall 
ensure that laborers and mechanics employed by 
contractors and subcontractors in construction work 
financed by a grant made under this section will be 
paid wages not less than those prevailing on similar 
construction in the locality, as determined by the 
Secretary of Labor under the Act of March 3, 1931 
(known as the Davis-Bacon Act; 40 U.S.C. 276a et 
seq.). The Secretary shall make a grant under this 
section only after being assured that required labor 
standards will be maintained on the construction 
work. 
‘‘(2) WAGE RATES.—Wage rates in a collective 
bargaining agreement negotiated under the Railway 
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