Freight RAILCAR Act of 2021
Bill: H.R.2289 | Sponsor: Rep. Schneider, Bradley Scott (D-IL)
Policy area: Taxation

Summary:
Freight Rail Assistance and Investment to Launch Coronavirus-era Activity and Recovery Act of 2021 or the Freight RAILCAR Act of 2021
This bill provides a new tax credit for 50% of freight railcar fleet modernization expenses. The bill defines freight railcar fleet modernization expenses to include amounts for railcar replacement and modernization, railcar scrap amounts, and for railcar facility and technology modernization.
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.

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  encourage the replacement or modernization of inefficient, outdated 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.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Freight Rail Assistance and 
Investment to Launch Coronavirus-era Activity and Recovery Act of 
2021'' or the ``Freight RAILCAR Act of 2021''.

SEC. 2. FREIGHT RAILCAR MODERNIZATION CREDIT.

    (a) In General.--Subpart D of part IV of subchapter 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 modernization expenses.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Freight railcar fleet modernization expenses.--The 
        term `freight railcar fleet modernization 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--
                    ``(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) Qualifying scrap amount.--The term `qualifying scrap 
        amount' means--
                    ``(A) the depreciated value or salvage value, as 
                applicable, of a qualified freight railcar (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 calculated by using the Association 
                of American Railroads Office Manual per pound credits 
                for steel, stainless steel, and aluminum (as 
                applicable) in effect on the date railcar is scrapped.
            ``(4) Qualifying railcar facility and technology 
        modernization amount.--The term `qualifying railcar facility 
        equipment and technology modernization amount' means amounts 
        paid or incurred 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 commences 
                        with the taxpayer,
                            ``(iv) which is used to modernize an 
                        existing qualified facility or existing 
                        railcars, and
                            ``(v) is used for modernization purposes.
                    ``(B) Modernization of existing qualified 
                facilities or existing railcars.--Property is used to 
                modernize an existing 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 corresponding 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 railcar components 
                        that improve the efficiency, quality, or safety 
                        of--
                                    ``(I) fleet management operations, 
                                or
                                    ``(II) railcar or railcar component 
                                manufacturing, repair, or modernization 
                                operations conducted pursuant to 
                                activity code certifications under the 
                                Association of American Railroads 
                                Manual of Standards and Recommended 
                                Practice, Section C, Part III, Appendix 
                                B (Specification 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 modernization purposes--
                            ``(i) testing and reliability equipment 
                        that facilitates the development of safer 
                        railcars and railcar components by AAR 
                        certified manufacturers, including accelerated 
                        life-cycle testing equipment,
                            ``(ii) innovative technological equipment 
                        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, cleaning 
                        or repairs to railcars to be conducted 
                        remotely,
                            ``(iv) equipment which increases the 
                        efficiency or capacity of, and enhances 
                        environmental controls related to facilities 
                        which conduct AAR certified blasting, cleaning, 
                        coating, and painting railcar activities,
                            ``(v) regenerative thermal oxidizers of 
                        volatile organic compounds or hazardous air 
                        pollutants, and
                            ``(vi) innovative technological equipment 
                        or software that will enhance the efficiency of 
                        a railcar owner's fleet management systems, 
                        including programs that map timing and routing 
                        of railcars to repair shops or storage 
                        facilities that improve efficiency of rail 
                        transportation.
            ``(5) Qualified newly built replacement railcar.--The term 
        `qualified newly built replacement railcar' means a qualified 
        freight railcar which--
                    ``(A) is built after the date of the enactment of 
                this section,
                    ``(B) is ordered or originally placed in service 
                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 taxable 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, subassembly 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 
        subcontract under 49 U.S.C. 5323(u).
            ``(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 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 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' means 
                modified, retrofitted, converted or rebuilt for the 
                purpose of meeting the significant improvement criteria 
                of subparagraph (B).
            ``(9) Qualified railcar modernization expenditure.--The 
        term `qualified railcar modernization expenditure' means any 
        amount paid or incurred--
                    ``(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.
            ``(10) Qualified facility.--The term `qualified 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 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 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) and is unable 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 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.
            ``(5) 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.
            ``(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, 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.--Section 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 by inserting at the end thereof the following new paragraph:
            ``(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 inserting 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 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 45U of the Internal Revenue Code of 1986.
    (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.
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