The U.S short line tax credit is designed to help keep small railroads strong, and how it is doing this is illustrated in an earnings report released Wednesday by the Genesee & Wyoming (GWI), the nation's second largest operator of short line and regional railroads.

In this year's first quarter, GWI reported income from continuing operations of $14.0 million or 38 cents per diluted share, compared with $11.2 million or 31 cents per share in the prior-year quarter.

“GWI's results in the first quarter benefited five cents per diluted share from the positive impact of the short line tax credit, which is in effect through 2009,” said the company. “Primarily as a result of the tax credit, GWI's effective income tax rate on its continuing operations decreased from 37.7% in the first quarter of 2008 to 27.1% in the first quarter of 2009.”

(The American Short Line and Regional Railroad Association is asking Congress to renew the tax credit in upcoming legislation.)

GWI cut its operating ratio to 81.1% in the first quarter of 2009 from 84.9% in the 2008 quarter. Operating income in this year's quarter increased 22.5% to $26.1 million.  Same-railroad operating expenses declined by $10.7 million, or 9.0%.