On the heels of Tuesday’s House Ways and Means Select Revenue Measures Subcommittee hearing on Temporary Policy in the Internal Revenue Code, American Short Line and Regional Railroad Association President Chuck Baker submitted comments to Congress to take action on tax-extender policies that include the 45G Short Line Tax Credit.
Since 2005, Class II and III railroads have relied on the Short Line Tax Credit “to enhance their ability to invest in the rehabilitation of short lines, which provide the imperative first and last mile of the U.S. freight rail system and connect small-town and rural America to the U.S. economy,” Baker said. “The right tax policy can be enormously beneficial to the American economy by incentivizing the capital investment businesses need to grow, innovate and create jobs. Those benefits are significantly reduced when tax policy starts and stops in a temporary short-term fashion.
“Forward planning is impossible and expensive multi-year projects are difficult to undertake. Particularly in the railroad industry, the most meaningful benefits with regard to service and safety come when we can rehabilitate an entire corridor, not just a mile here and a mile there. For us, piecemeal investment is only as good as the size of the pieces, and one year and sometimes even retroactive extensions are small pieces indeed.”
In the hearing’s opening statements, Chairman Mike Thompson (D-Calif.) urged the Committee to evaluate each of the temporary provisions, pointing out that uncertainty in tax policy can threaten job growth in crucial sectors across the economy, including defense, health care, finance and infrastructure.
“We should strive to make tax policy that is forward-looking and provides not only predictability for our businesses, but security for regular people whose livelihoods and household budgets are impacted by temporary policy,” Thompson said.
Ranking Member Adrian Smith (R-Neb.) also provided supportive words for the Short Line Tax Credit: “In particular, we should credit stakeholders interested in the [tax] credit and biodiesel tax credit for stepping forward and bringing us constructive ideas to help provide long-term certainty to those provisions.”
During the hearing, it was noted that Congress has made myriad attempts to address the issue. On March 14, 2018, the subcommittee held an extensive hearing that gave stakeholders and interested parties an opportunity to discuss the future of the provisions; more than 20 parties appeared. And toward the end of 2018, the House passed legislation that would have made the Short Line Tax Credit—which expired at the end of 2017—permanent.
In the 116th Congress, on top of Tuesday’s hearing, several actions have been taken to address short-term tax policies:
- The Tax Extender and Disaster Relief Act of 2019 (S 617) was introduced by Senators Chuck Grassley (R-Iowa) and Ron Wyden (D-Ore.) on Feb. 28, 2019. Section 109 of the bill provides for the extension of the Short Line Tax Credit through 2019.
- On Feb. 26, House Ways and Means Committee Chairman Richard Neal (D-Mass.) held a Transportation Stakeholder meeting during which he acknowledged the need to address the “extenders.”
- A pair of bills—H.R. 510 and S. 203—that would make the tax credit permanent have been introduced and are rapidly gaining bi-partisan co-sponsors, with 137 and 27, respectively.
“For 12 years, the Short Line Tax Credit has proven its worth,” concluded Baker. “It has maximized capital investment by railroads and customers, significantly improved competitive rail service for shippers, helped improve railroad safety and been the difference between piecemeal and corridor improvements. It has worked as intended, and when you find something that works, the best thing to do is let it work. I very respectively encourage the 116th Congress Ways & Means Committee to fix the unintended but real suboptimal policy consequences of sporadic attention to the Short Line Tax Credit and make this credit permanent.”
In a related lobbying effort, ASLRRA and Natural Gas Vehicles for America (NGVAmerica) planned on March 15 to host Congressional tax aides for a “lunch and learn” to discuss the impact that expired tax extenders, including provisions dealing with alternative fuels, clean transportation and infrastructure investment, among others, have on businesses and taxpayers.
In addition to the 45G tax credit, the tax extenders also include the Alternative Fuel Tax Credit (AFTC), a credit of $0.50 per gasoline gallon equivalent (GGE) of certain transportation fuels, including natural gas, liquefied petroleum gas, P Series Fuels, liquefied hydrogen and others. “Extending the AFTC retroactively for 2018 and prospectively for 2019 will allow businesses and customers to continue to deploy cleaner alternative fuel technologies,” ASLRRA noted.
“It’s important for Congress to understand the impact these tax extenders have on the transportation industry and, ultimately, our environment,” said Dan Gage, President of NGVAmerica. “If Congress is serious about preserving our environment, we need to make sure that the technologies working toward a cleaner climate have a level playing field. We’re thrilled to be joined by the ASLRRA in urging Congress to extend these tax credits as soon as possible, particularly with filing season upon us.”