HR-516-119
Referred to the House Committee on Ways and Means.
Sponsored by Mike Kelly (R-PA)
What it does
This bill would raise the per-mile tax credit for railroad track maintenance under Section 45G of the Internal Revenue Code from $3,500 to $6,100. Starting in 2026, the $6,100 amount would be automatically adjusted each year for inflation using the standard cost-of-living formula. The bill would also update the eligibility cutoff for qualified expenditures from January 1, 2015 to January 1, 2024, and would apply to expenditures paid or incurred in tax years beginning after December 31, 2024.
Who benefits
Small and mid-size freight railroads (Class II and Class III carriers) that own or lease track and are the primary users of the Section 45G credit. Shippers — particularly agricultural producers, energy companies, and manufacturers — who depend on short-line railroads to move goods to larger rail networks. Rural communities served by short-line railroads, where track deterioration can lead to service loss. Railroad maintenance and construction workers whose employment depends on track upkeep spending. Indirectly, trucking alternatives become less necessary, potentially reducing highway wear in rural areas.
Who is hurt
Federal taxpayers broadly, as the expanded credit would reduce federal tax revenue. Class I (large) railroads, which are not eligible for the Section 45G credit, may face a competitive disadvantage relative to subsidized short-line operators. Trucking companies that compete with short-line railroads for freight could see increased competition if the credit spurs rail network improvements.
Supporters argue
Supporters argue that the $3,500 per-mile credit has not been updated since it was established and has lost significant purchasing power to inflation, meaning the real value of the incentive has eroded while track maintenance costs have risen. They contend that short-line railroads serve rural and agricultural communities that lack alternative freight options, and that without adequate track maintenance, these lines face closure — cutting off farmers, manufacturers, and energy producers from national supply chains. The inflation-indexing provision would prevent the credit from becoming obsolete again over time.
Opponents argue
Opponents argue that the Section 45G credit is a targeted subsidy for a specific private industry, and that nearly doubling the per-mile amount to $6,100 represents a significant expansion of a tax preference that primarily benefits corporate railroad operators rather than the communities they serve. They contend that if short-line railroads provide genuine public value, direct infrastructure grants — subject to public accountability and performance requirements — would be a more transparent and efficient mechanism than an open-ended, inflation-indexed tax credit with no performance conditions attached.
Constitutional context
Tax credits are enacted under Congress's broad taxing and spending authority under Article I, Section 8, Clause 1. As a revenue bill modifying the Internal Revenue Code, it must originate in the House under the Origination Clause (Art. I, §7, cl. 1) — which it does. No significant constitutional tension is present.
Checks and balances
Congress sets the credit amount and eligibility rules; the IRS administers and enforces the credit through the tax filing process; the Joint Committee on Taxation scores the revenue impact, providing a fiscal check on the legislation.
Historical precedent
The Section 45G railroad track maintenance credit was originally created by the American Jobs Creation Act of 2004 and has been extended and modified multiple times by Congress, most recently in the Consolidated Appropriations Act of 2021.